New round of oil sands action

Projects from Canadian Natural Resources, Imperial Oil and Cavalier Energy targeting a combined 370,000 bpd of bitumen production

Gary Park

For Petroleum News

A mix of veterans and a newcomer have raised the curtain on Alberta oil sands projects that are designed to produce a combined 370,000 barrels per day of bitumen.

Despite occasional setbacks with its Horizon oil sands mine, Canadian Natural Resources, CNR, is ready to embark on developing two in-situ leases — one at Kirby to yield 140,000 bpd and one at Grouse to add 40,000 bpd.

Company President Steve Laut said current estimates for Kirby South indicate capital costs will run to C$32,000 per flowing barrel of bitumen, with the initial injection of steam into the deposit scheduled for November 2013

For Kirby North, CNR has filed a regulatory application and is targeting initial steam in early 2016.

The Kirby Expansion Project will use steam-assisted gravity drainage, SAGD, over the 30-year operating life of the project to melt and extract the deep bitumen deposits.

The same technology will apply to the Grouse project, which is due to inject its first steam in 2017, assuming regulatory approval.

The company’s flagship Horizon oil sands mining project is budgeted for C$1.88 billion of capital spending this year to expand the nameplate capacity to 250,000 bpd from 110,000 bpd.

Laut said CNR has divided the expansion into five segments to keep a tighter control on costs, which are currently coming in 5 percent below estimates.

CNR said it is also hoping to make a sanctioning decision later this year for a 150,000 bpd project in partnership with North West Upgrading to turn bitumen into synthetic crude for subsequent refining into fuels.

The upgrader is designed for completion in three phases of 50,000 bpd each, with the first carrying a price tag of C$5 billion.

Imperial in-situ facilities

The first, at a 100 percent-owned lease called Aspen, will have SAGD capacity of 80,000 bpd. An application is expected to be completed for a regulatory application in early 2014.

The second, unnamed project, is currently undergoing resource delineation and assessment, setting the stage for potential production in the early 2020s.

Otherwise, Imperial is on track to start production by late 2012 at its Kearl oil sands mine, which has an eventual goal of 340,000 bpd, while its 40,000 bpd Nabiye facility received corporate approval in February.

New oil sands producer

It is creating a standalone oil sands producer called Cavalier Energy to turn its leases in northeastern Alberta into a 100,000 bpd operation.

President and Chief Operating Officer Jim Riddell told the company’s annual meeting that the objective, through developing the oil sands and liquids-rich gas plays, is to reduce Paramount’s gas exposure to 40 percent by 2013 from about 79 percent now.

The company hopes to file a regulatory application this year to develop 192,000 acres of mostly 100 percent-owned oil sands leases, starting with a 10,000 bpd pilot project, followed by three phases of 30,000 bpd each over the next decade.

Paramount estimates the first commercial phase would cost C$1.4 billion, with the next two phases coming in at slightly over C$1 billion each.

Cavalier will trade as a separate entity, although Paramount will retain an unspecified interest.

Paramount also reported that it plans to spend C$180 million building a liquids extraction facility to process 200 million cubic feet per day of gas from its liquids-rich Kaybob play in Alberta.

The facility is expected to be commissioned in the second half of 2013 and will be designed to double current production of 13,500 barrels of oil equivalent per day.

Paramount also owns 127,000 net acres in the gas-rich Liard Basin of northern British Columbia which it said will be developed as gas prices recover.