Deer Creek moves on several fronts

Gary Park

Oil sands start-up Deer Creek Energy is pushing ahead with a new phase of its plans to produce 200,000 barrels per day by 2020.

Through newly-formed subsidiary, Deer Creek Pipelines, jointly-owned with Enerplus Resources Fund, it has unveiled plans for a C$37 million pipeline to carry blended bitumen from its Joslyn operation to the Athabasca terminal near Fort McMurray.

Deer Creek owns 84 percent of both the Joslyn venture and the pipeline unit.

The sales line will cover about 40 miles and carry 40,000 bpd of bitumen production.

Construction work on Joslyn is expected to start in the third quarter, moving from a first phase of 600 bpd to 10,000 bpd in early 2006.

Deer Creek president and chief executive officer Glen Schmidt said the pipeline is an “important step for Deer Creek (providing) the first direct pipeline transportation route to market.”

Deer Creek is also part of a 14-member team at Quadrise Canada Fuel Systems, a private firm that is testing another technology innovation in the Alberta oil sands.

Known as MSAR (multi-phase superfine atomized residue), it is the offspring of an emulsion fuel developed in the 1980s by BP and Venezuela’s stated owned PDVSA for bitumen deposits similar top those being extracted in northern Alberta.

MSAR not only reduces the wasteful use of scarce and costly natural gas, it is projected to lower the cost of producing bitumen by US$2.50 per barrel.

Deer Creek has also announced that a letter of intent has been executed with a major oil sands producer that will see Deer Creek purchase light density diluents for its produced bitumen and sell the resultant blended bitumen to the producer.

The proposed deal covers two years from April 2006 and is expected to have a positive impact on bitumen value for Deer Creek by providing similar price economics to blending with gas condensate.