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Canadian Natural Resources plans oil sands megaproject Exploring a C$6.5 billion scheme on an undervalued 3.6 billion barrel lease acquired last year from BP Amoco Gary Park PNA Canadian Contributing Writer
Up-and-coming Canadian Natural Resources is poised to launch a massive oil sands and heavy oil project on a property it acquired last year from BP Amoco and initially thought had “little value.”
By September, the company intends to disclose plans for a C$6.5 billion, 300,000-barrel-per-day facility that could take seven to 10 years to bring to peak output.
The Mic Mac project, with an estimated 3.6-billion barrel deposit, is the latest for the Athabasca oil sands region, 250 miles northeast of Edmonton, where C$25 billion in capital investment is anticipated over the next 20 years.
Of the two established oil sands producers, Syncrude Canada is aiming for 480,000 barrels per day by 2008, more than double current output, and Suncor Energy is hoping to quadruple production to 450,000 barrels per day by 2007.
The lineup also includes Shell Canada’s C$4.1 billion facility to achieve 150,000 barrels per day by late 2002; Mobil Canada’s C$2.5 billion Kearl River plant, with output of 160,000 barrels per day by 2005; and PanCanadian Petroleum’s C$370 million, 70,000-barrel-per-day venture.
Canadian Natural, already active in the Primrose and Pelican Lake regions of northern Alberta, gained the Mic Mac lease in a C$1.06 billion purchase of BP Amoco’s Wabasca heavy, Bonnyville heavy thermal and Nipisi conventional oil properties.
The deals boosted company oil output by about 50 percent to about 120,000 barrels per day, making it Canada’s third largest domestic oil producer behind Imperial Oil and PanCanadian.
Rescued from the brink of financial ruin in 1988, Canadian Natural now boasts a stock market value of about C$3.9 billion, with net reserves in Western Canada of 320 million barrels of oil, 13 million barrels of natural gas liquids and 1.8 trillion cubic feet of gas.
Company Chairman Allan Markin said the once under-rated Mic Mac oil sands deposits may actually be comparable in size to Syncrude’s and Suncor’s main reserves. “We didn’t give it a lot of value to begin with,” he said. “Now that we know its size and strength, we will go ahead.”
Long lead time needed He said the company needs a long lead time to complete 165 evaluation wells and a preliminary plan because it has no previous experience in the oil sands business.
Markin said “we need to know this business first.” By September, he said, “we may have a better plan than we do today.” After that, “it’s just a matter of timing.”
He emphasized that Canadian Natural is confident its track record as an independent, low-cost producer can be applied to the oil sands, although the Mic Mac scheme may investigate sharing infrastructure at Shell Canada’s neighboring development.
Current oil prices make the venture attractive, but it would be economic even at US$18 per barrel, he said.
The company intends to operate both a conventional open-pit mine — along the lines of those employed by Syncrude and Suncor — and the emerging steam-assisted gravity drainage technology, which it is already using in other heavy oil developments.
Analysts said the challenges facing Canadian Natural include a complex regulatory process and deciding how and where to refine and upgrade the raw bitumen.
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