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Shell unloading oil sands asset Orion thermal recovery operation underperforming at 5,000 bpd; ConocoPhillips assets also on block, with Oil India interested Gary Park For Petroleum News
Royal Dutch Shell is looking to shed an underperforming oil sands project in Alberta six years after acquiring the asset as part of a C$2.4 billion takeover of oil sands startup BlackRock Ventures.
The planned divestiture, which the company hopes to complete this year after receiving proposals by mid- to late-July, was announced on the website of Scotia Waterous.
It involves the 5,000 barrels per day Orion thermal recovery operation on a 5,100-acre property.
A Shell spokesman said the decision is part of an ongoing effort to “manage our overall heavy oil portfolio and focus on our core assets.”
He said the primary in-situ growth focus is on the Peace River area of northwestern Alberta.
The original Orion strategy was to run a 500 bpd pilot plant for a few months, then expand to 5,000 bpd and eventually 10,000 bpd. The goal was attained in 2010, but was found to be unsustainable.
Recent investment bank surveys of steam-to-oil efficiency ratios in thermal projects placed Orion near the bottom.
BMO Capital Markets analyst Randy Ollenberger, who covers Imperial Oil but not Shell, doubted Imperial would be interested in Orion because it is “not typically a big acquirer and sees itself as having enough assets already in the hopper.”
Record amount paid Shell’s purchase of BlackRock raised questions at the time among investors because of the record amount paid for the oil sands reserves, more than triple what France’s Total paid for Deer Creek Energy in 2005.
Scotia Waterous said Orion was been producing for more than 10 years and is currently producing from 22 well pairs, generating an operating income of C$15.6 million in the first quarter.
Peace River currently has capacity to produce 62,500 bpd from three properties and is now facing a regulatory review of plans to build an 80,000 bpd plant estimated to hold 4.9 billion barrels of bitumen.
Also on the oil sands block is ConocoPhillips 50 percent stake in its oil sands assets, including Surmont, a 25,000 bpd joint venture with France’s Total.
The offerings coincide with an indication from state-owned Oil India that it is considering a bid for the Conoco assets, although the cash-rich company said it would probably limit an offer to C$100 million-C$300 million because of its inexperience in the oil sands.
Mercom going public On May 29 Mercom Oil Sands, a small Canadian company, said it would list on the London AIM junior stock exchange, debuting with a market capitalization of C$51.5 million.
Its holdings include a farm-in agreement with Norwegian Oil Sands, a subsidiary of Nordic Petroleum, under which the company will acquire a 50 percent ownership and working interest in four leases over the Chard field in the Athabasca region,
Mercom said it plans to drill eight wells over the next two years to bring the development in production.
This is the second oil sands company to shun the Canadian markets in recent times, following Sunshine Oilsands, which raised C$580 million in an initial public offering on the Hong Kong Stock Exchange.
Mercom Chief Executive Officer Kim Berknov told the Financial Times that the listing would create the “only pure play Canadian oil sands business listed on AIM,” providing an “increasingly attractive and growing, but not particularly well-known sector of the oil and gas market.”
Mercom and Sunshine could be on the shopping list of state-owned Oil India, a cash-rich enterprise that has shown interest in the ConocoPhillips asset and indicated it might be ready to invest C$100 million-C$300 million to secure an oil sands stake to gain experience in the resource.
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