Husky gets steamed up

Benefits from lower capital costs as it pushes ahead with SAGD in Saskatchewan, targeting 55,000 bpd by 2017 from smaller projects

Gary Park

For Petroleum News

Husky Energy, after quietly assembling the pieces, has emerged as the key player in extending thermal oil production eastward from Alberta into the province of Saskatchewan at capital costs that could benefit oil sands in-situ development.

In announcing a capital budget of C$4.8 billion for 2013, up about C$100 million from this year, it forecast production growth to 310,000-330,000 barrels of oil equivalent per day next year from 301,000 boe per day in 2012 and set annual growth of 5 percent to 8 percent in the 2012-17 period.

It’s all part of the reshaping of the company under Chief Executive Officer Asim Ghosh, who has been at the helm for two years.

He told analysts “thermal production for us is already big and is getting bigger” as the company applies the technology to target 55,000 barrels per day by 2017.

He said the thermal operation gives Husky a “second plank to supplement our historical dependence” on cold heavy oil production with sand.

Many of the thermal projects are being developed in Husky’s heavy oil areas of Lloydminster, which straddles the Alberta-Saskatchewan border.

Smaller SAGD projects

For Husky, SAGD is providing a breakthrough in capital costs in Saskatchewan where its Pikes Peak South project is expected to come online at a cost of C$24,000 per flowing barrel, while the Paradise Hill project is already producing for an outlay of C$28,000 per flowing barrel.

That compares with the expected capital investment of C$68,000 per flowing barrel for Husky’s Sunrise SAGD project in Alberta.

Asked to explain the difference, Chief Operating Officer Rob Peabody said the company’s many years of experience in thermal heavy oil allows it to use a cookie-cutter approach in building its small Saskatchewan SAGD projects.

“I think we will see further capital efficiencies in oil sands in-situ projects as well,” he said, noting that the 60,000 bpd first phase of Sunrise, which is scheduled to produce first oil in 2014, includes some infrastructure that will be used in later phases.

But Peabody said it is not fair to make a direct comparison between Sunrise Phase 1 and the Saskatchewan SAGD projects because Sunrise does not have a significant amount of pre-investment for future phases.

However, Husky’s Saskatchewan program is verging on steady growth, including sanctioning of its 10,000 bpd Rush Lake project, 2,000 bpd more than originally planned, with first oil expected in 2015.

In addition, its Pikes Peak South and Paradise Hill projects are expected to exit 2012 with production at 40 percent of their targeted combined output of 11,000 bpd, while commissioning of the Sandhill development is on target for 2014.

The original Pikes Peak operation has been producing since 1982, passing the 50 million barrel milestone about 2005.

Other planned thermal projects for Saskatchewan include Dee Valley (3,500 bpd by 2015-16), Edam East (8,000 bpd by 2016-17), Edam West (3,500 bpd by 2016-17) and four more prospects rates as candidates for 4,000-5,000 bpd each after 2017.

In the Alberta oil sands, the first phase of the 50 percent owned Sunrise project is on schedule for first oil in 2014.

Construction of the initial phase is half finished, with 85 percent of the C$2.7 billion price tag now fixed. Regulatory approvals are in hand for up to 200,000 bpd of production from Sunrise.