Devon plunges into Alberta oil sands

Gary Park

Petroleum News Calgary Correspondent

Devon Energy is leading the way for U.S.-based independents by taking a head-long dive into the deep end of Alberta’s oil sands.

Following a year of evaluation, it unveiled plans Sept. 16 for a 100-percent-owned project designed to produce 35,000 barrels per day by late 2006 or early 2007.

The Oklahoma City-based company expects to file regulatory applications in November for the US$400-million Jackfish project, which will tap into an estimated 300 million barrels of bitumen.

Unlike its U.S. peers, who have embarked on a multi-billion buying spree in Canada over recent years to corner natural gas assets, Devon — through its takeovers of Anderson Exploration and Northstar Energy for a combined C$5.3 billion — has taken a broader view of its opportunities.

Devon Canada president and chief executive officer John Richels, formerly a senior executive with Northstar, told reporters earlier this month, that Alberta’s heavy oil is an appropriate part of any portfolio mix, given the integration of the North American energy market.

He said the economics of Jackfish work based on detailed engineering and Devon’s experience in testing steam-assisted gravity drainage to extract bitumen from deep reservoirs.

Because of his company’s extensive knowledge as operator of the Dover test facility near the oil sands “capital” of Fort McMurray, it will be able to hurdle over the usual pilot project with Jackfish and go straight to the production stage, Richels said.

Steam assisted gravity drainage involves parallel pipes, one injecting steam and heating the viscous bitumen, allowing it to flow to the surface.

The method is being used by EnCana at its Foster Creek project, which is targeted for 30,000 bpd in 2004, and by Petro-Canada at its MacKay River project.

Backed by C$15 million in Alberta and Canadian government money and C$15 million from a consortium of companies, the Dover facility earlier this month embarked on exploring a new alternative to loosening bitumen.

It will study the use of carbon dioxide, propane or butane, which, if successful, will reduce carbon dioxide emissions at plant sites by 85 percent as well as reducing the use of water.

Greenhouse gas emissions and water consumption are seen as two of the biggest headaches to the rapid expansion of the oil sands.