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ExxonMobil units pooling knowledge, assets
for mega-developments Company studying feasibility of projects that could cost C$8.3 billion and yield 410,000 barrels per day within 10 years, although Imperial Oil takes cautious line on timetable Gary Park PNA Canadian Correspondent
ExxonMobil Corp., already Canada’s oil sands/heavy oil giant, is blowing dust off a possible C$8.3 billion in projects for northern Alberta.
Its sister companies — Imperial Oil Ltd. and ExxonMobil Canada — are combining their knowledge and assets to support a “world-scale” development, said Charles Ruigrok, Imperial’s oil sands vice-president.
They have agreed to work together to assess the feasibility of several different development prospects, he told a recent FirstEnergy Capital Corp. oil sands investment conference.
He said that although Imperial has yet to set any timetable “there will be value to be derived” from pooling the joint resources.
On the table are adjoining leases north of Fort McMurray, where earlier plans have pointed to a possible 410,000 barrels per day of output over the next 10 years.
Imperial and Husky Energy Inc. are joint owners of one lease, with Imperial as 75 percent owner and operator of a portion deemed suitable for surface mining and Husky as 80 percent owner and operator of portion that would use various extraction methods including steam injection to recover deeply buried bitumen deposits. Husky has talked big development Although Imperial has insisted any reports of commercial development are premature, Husky last year talked of development in a big way, with two project costing C$4.8 billion (US$3 billion) and achieving output of 250,000 barrels per day by 2012.
Husky said talks with Imperial were being advanced, but Imperial cooled speculation, saying it was examining all of its many opportunities in the region.
It said the Kearl lease was a “very attractive area for future development in broad terms, but we have no defined plans.”
As well as processing 65,000 barrels per day of Canadian heavy crude, Imperial has a 25 percent stake in the giant Syncrude Canada Ltd. oil sands operation that is engaged in an C$8 billion US$5 billion) expansion to move production to 360,000 barrels per day by late 2004, or 20 percent of Canada’s crude output.
In addition, Imperial is solo owner and operator of the Cold Lake heavy oil project, where production is now about 130,000 barrels per day and has embarked on a C$1 billion expansion. One property shelved in 1999 The other Kearl lease under study is ExxonMobil Canada’s 1.7 billion barrel bitumen property which was shelved in 1999 when the company said it needed to take a “more prudent, paced” approach at a time when oil sands development costs were spirally upwards at an alarming rate.
Initial plans called for a start-up at 100,000 barrels per day in 2005, but the wholly owned unit of ExxonMobil said it wanted to study design changes and improvements that could boost the production target to 160,000 barrels per day.
Ruigrok acknowledged that Imperial’s exposure to the volatile heavy oil sector is raised as a concern on occasions, but he noted that the company has some protection from its significant downstream integration — including refineries in Alberta and Ontario — for the bulk of its production. Refining could be issue In fact, refining capacity for Canada’s heavy crude could be the biggest issue facing the sector if U.S. demand for the product grows as much as expected to tap into 180 billion barrels of recoverable oil using current technology, said John Mawdsley, a FirstEnergy heavy oil analyst.
A recent FirstEnergy study estimated that the U.S. Midwest took 729,000 barrels per day of Canadian heavy crude, 92 percent of capacity, largely because of the attractive economics.
In North America, five refineries have control of 64 percent of the heavy refining capacity accessible to Canadian heavy crude, said Mawdsley, with BP PLC controlling 20 percent and Koch Industries Inc. at 16 percent.
The best hope for a fresh alternative is a proposal being developed by Calgary-based pipeline Enbridge Inc. which is studying the netback economics of accessing, by various alternatives, new markets in California and the Asia Pacific Rim for 400,000 barrels per day of production.
Richard Bird, vice-president for transportation north, said a full feasibility study is under way to see a “relief valve” for producers.
Based on early “high level” findings, the expected netbacks from the California region compare favorably with the U.S. Midwest. BC Gas also in running Also in the running to open up new markets is Vancouver-based BC Gas Inc., which plans a C$1 billion line to start shipments by mid-2005 and have eventual capacity of 450,000 barrels per day.
It is negotiating with TrueNorth Energy Inc., which expects to move 190,000 barrels per day from its Forty Hills project by 2008, and Petro-Canada, which is aiming for 110,000 barrels per day from two projects by 2006.
Enbridge, meanwhile, already has a 570,000 barrel-per-day line from the Athabasca oil sands region to Edmonton, with Suncor Energy Inc. as the only current customer, but Petro-Canada has signed up for 60,000 barrels per day and EnCana Corp. has contracted for up to 115,000 barrels per day.
Enbridge is confident it will reach full capacity on that line within five years.
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