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Athabasca oil sands development booms in northern Alberta Up to C$40 billion in projects in the works; would increase oil sands output to 1.7 million barrels a day by 2015 Gary Park PNA Canadian Correspondent
There may be no stranger place in the world to find a traffic jam than the 50 miles of Highway 63, north of Fort McMurray. Almost around the clock, the “road to nowhere” from northern Alberta’s oil sands capital is packed with cars, buses and trucks ferrying 10,000 permanent staff and construction workers to the scene of Canada’s most dizzying investment boom.
It is a region bursting with optimism, where the National Energy Board has estimated up to C$40 billion worth of projects are in various stages of development to raise oil sands output, currently almost 340,000 barrels a day, to 1.7 million BPD by 2015, accounting for 50 percent of total Canadian crude yield.
After 30 years of being viewed skeptically as it grappled with untried and flawed technology, the Athabasca region is suddenly seizing the spotlight.
When Canada’s Prime Minister Jean Chretien held his first meeting with President George W. Bush in February, the oil sands figured large as the two leaders spoke “at length” on energy matters, with Chretien predicting that synthetic crude could soon be produced for C$11 a barrel (about US$7.25).
“It was not a casual conversation,” Chretien said. “My understanding is that (officials in the new U.S. administration) see the energy crisis in California as a serious problem and they are looking at what they have to do to reduce their reliance on oil from the Middle East. They want to know what kind of collaboration they can develop with us.”
Chretien said no projects anywhere in the world could offer greater long-life, security-of-supply potential than the oil sands. Major new projects unveiled As if on cue, Husky Energy, Petro-Canada and Imperial Oil all, within days of Chretien’s pitch, unveiled plans for major new projects in the Athabasca region.
Husky said it was ready to move into the oil sands in a big way, with plans for one Cold Lake-area operation on its own and two Fort McMurray-area projects with Imperial (which is 69.6 percent owned by ExxonMobil) as a possible partner. The three projects carry a combined price tag of C$5.25 billion, with total output of 270,000 barrels per day within seven to 11 years.
Initially, Husky is targeting a C$450 million Cold Lake plant to produce 20,000 barrels per day by 2004.
It then hopes to develop two Kearl Lake leases — one to produce 100,000 barrels per day at a cost of C$1.6 billion, possibly starting in 2005; the second would be a C$3.6 billion scheme with output of 150,000 barrels per day.
A Husky spokeswoman said Imperial is the joint venture partner in both leases and has been invited to join negotiations.
Imperial separately announced a C$1 billion shot in the arm for two expansion projects at its Cold Lake bitumen recovery site, where C$1.7 billion has already been invested and production is at 119,000 barrels per day. If the new plans are approved, Imperial is aiming for 180,000 barrels per day by 2006.
Wilf Gobert, an analyst with Calgary-based investment firm Peters & Co., said the decision is a “great confidence indicator for the heavy-light oil price differential.”
Then Petro-Canada joined the rush, unveiling tentative plans for three projects to yield 150,000 barrels per day within five years, including its C$290 million MacKay River project scheduled to start production at 30,000 barrels per day in late 2002.
It has also begun an economic evaluation of two more leases, which could each produce 60,000 barrels per day. Petro-Canada said it hopes costs and refining methods will be known in time for regulatory applications to be filed later this year. Over ventures in works In addition to major expansions under way by the pioneering synthetic crude producers, Syncrude Canada and Suncor Energy — which are investing a combined C$11 billion to each achieve upwards of 400,000 barrels per day — a host of other ventures are nearing completion or close to make-or-break decisions.
• Shell Canada’s C$4.8 billion Athabasca project, with Chevron Canada and Western Oil Sands as partners, is due for a late 2002 start-up at 150,000 barrels per day.
• PanCanadian Petroleum is investing C$370 million at Christina Lake in a three-phase development to start at 10,000 barrels per day in 2002 and grow to 70,000 barrels per day by 2009.
• Alberta Energy Co. expects to come on stream in early 2002 at its Foster Creek lease with 10,000 barrels per day, while it ponders a 10-fold expansion by 2007.
• ExxonMobil Canada is expected to decide this year whether to proceed with its C$2.5 billion Kearl River scheme after making design changes aimed at raising planned output to 160,000 barrels per day from 100,000 barrels per day, tapping reserves of 1.7 billion barrels.
• Canadian Natural Resources, an oil sands newcomer, is searching for partners to join its ambitious Mic Mac project, a C$6.5 billion undertaking to achieve 300,000 barrels per day within 10 years. Costs slashed in half since 1970s The advances in oil sands technology, which have seen operating costs slashed in half from C$26 a barrel in the 1970s, coupled with a retooling of North American refineries to accept heavier grades of crude, has enticed a wide range of smaller companies to Fort McMurray in the last couple of years.
Undaunted by high, up-front capital costs and long time horizons, these new investors include:
• Fort Hills, a C$1.1 billion TrueNorth Energy partnership by Koch Petroleum Canada 78 percent and UTS Energy 22 percent to exploit a 2.4 billion barrel resource and deliver 190,000 barrels per day of bitumen, starting in 2005.
• Orion, a steam-assisted extraction project at Hilda Lake in northeastern Alberta. Owned 75 percent by BlackRock Ventures, it is a C$180 million project that is producing 2,000 barrels per day from a 154 million barrel reserve and hopes to grow in two phases to 10,000 barrels per day in 2002, then double.
• Long Lake is a C$450 million project by OPTI Canada, using an upgrading technology developed by Israel’s Ormat Group. Full operation at 30,000 barrels per day is projected for 2004.
• Hangingstone, an experimental project 30 miles southwest of Fort McMurray, is investing C$130 million to raise output from 1,500 barrels per day to 10,000 barrels per day by 2005. The lease is owned by Japan Canada Oil Sands, 69.2 percent controlled by state-run Japan National Oil, 6.2 percent by Japan Petroleum Exploration and 24.6 percent by 70 Japanese companies.
• Privately owned SyEnCo Energy has started preliminary studies, hoping to begin commercial production in 2004 from a 2.7 billion barrel lease 60 miles south of Fort McMurray. The investors hope to build quadruple output from 20,000 barrels per day at a cost of C$1.5 billion, using coal rather than natural gas as fuel for upgrading the viscous oil.
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