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Statoil puts footprint in Alberta oil sands Norwegian oil giant drawn by ‘long-term’ barrels in pouncing on privately held company with plans for bitumen production, upgrading Gary Park For Petroleum News
The Norwegian flag has been planted in the oil sands of northern Alberta, with Statoil making a bid to acquire high-flying North American Oil Sands for C$2.2 billion.
Statoil, which is due to complete a merger with domestic rival Norsk Hydro later this year, has consistently been high on the list of prospective oil sands acquisitors.
Backed by its experience as a 15 percent stakeholder in Venezuela’s Sincor heavy oil venture, Statoil said it plans to spend up to US$15 billion on the Alberta leases to produce about 200,000 barrels per day of bitumen by 2020.
Privately held North American operates 257,000 acres of oil sands leases in the Athabasca region of northeastern Alberta, with estimated recoverable reserves of 2.2 billion barrel.
Formed in 2001, North American has made one of the boldest entries into the oil sands, surfacing two years ago with plans to invest C$12 billion on a 220,000 bpd production facility and a 160,000 bpd upgrader, setting a target date of 2015 for completion of both facilities.
If the Statoil deal is concluded as scheduled in June, it is not clear what modifications might be made to those projects or their timing.
North American is 50 percent owned by Paramount Resources, which exchanged an interest in oil sands assets for a share of North American’s upstream action. The other key shareholders are the Ontario Teachers’ Pension Plan Board and funds managed by affiliates of ARC. Those three control 69 percent of North American.
In short order, North American has raised more than C$600 million in a series of private placements and, before the Statoil deal, was eying regulatory filings by mid-2007 for an initial public offering.
In addition to its C$7.5 billion Kais Kos Dehseh operation to develop the Athabasca leases, using steam-assisted gravity drainage technology, it has been working on a C$4.5 billion facility near Edmonton to upgrade bitumen into synthetic crude.
Application before regulators A regulatory application is before the Alberta Energy and Utilities Board and Alberta Environment for a 10,000 bpd demonstration upstream project to make its debut by late 2009, growing by 70,000 bpd by late 2011, then another 140,000 bpd by late 2015.
The upgrader is scheduled to start processing 70,000 bpd in 2011 and reach 160,000 bpd in 2014.
Statoil has calculated operating costs at US$10 per barrel for the upstream portion and US$4 per barrel to upgrade the bitumen to synthetic crude. Those costs include buying natural gas for steam and processing needs.
Chief Financial Officer Eldar Saetre believes the undertaking can break even with oil prices at US$40 per barrel, which has prompted Statoil to consider taking an even larger stake in the oil sands.
North American has won friends in the Alberta government by keeping its value-added upgrading operations within the province at a time when other majors have been looking to establish partnerships or buy refining assets in the U.S.
Company Senior Marketing Vice President Michael Langley has told investors a domestic upgrader is an “essential element” of North American’s strategy because it mitigates the price volatility of bitumen, reduces transportation costs and risks and provides alternatives fuels for steam-assisted bitumen extraction, which relies heavily on natural gas.
Statoil world’s third-largest net seller of crude Statoil was formed in 1972 and is the world’s third-largest net seller of crude oil after Saudi Aramco and National Iranian Oil, with an average traded volume of 2.1 million bpd.
It posted revenues from its integrated operations of US$80 billion last year and has estimated reserves of 4.185 billion barrels of oil equivalent.
Statoil Chief Executive Officer Helge Lund said the North American acquisition is an “important strategic move which supports our global growth ambition and increases our reserve bookings in the long term.”
Peder Sortland, Statoil’s senior vice president for non-conventional oils, said the “long-term” barrels in the oil sands propelled the deal.
Looking beyond 2015, “we want to build further in the North American energy market and add on to our heavy oil portfolio,” he said.
North American: money needed for development North American Chief Executive Officer Pat Carlson said his company started talks with Statoil and other large international players as it explored financing options for its project.
“A small company like ours needs money and Statoil has more financial capacity than us to develop the oil sands assets,” he said.
Carlson said the two companies’ visions for oil sands development became even more strongly aligned on the issue of curbing the environmental impact of the Alberta resource, which is thought to generate two to three times the greenhouse gases of conventional oil operations.
Lund said the carbon dioxide footprint at the oil sands is “considerably higher” than Statoil’s North Sea fields.
But Statoil, through its carbon sequestration offshore Norway, is in the “forefront of the industry in this area.”
The Norwegian company has been undertaking trail-blazing work in carbon capture including at fields in the North Sea, Barents Sea and Algeria.
The company estimates those three undertakings will see 2.9 million metric tons of carbon dioxide stored underground annually.
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