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Petro-Canada eyes oil sands alternatives Looks at breaking mega-project into smaller pieces Gary Park Petroleum News Calgary correspondent
Petro-Canada has given momentum to speculation that it could tackle its massive Alberta oil sands program in smaller bites.
Chief Executive Officer Ron Brenneman said Nov. 24 that the company is “looking for a capital solution ... that can give us better economics than the big project that we had to shelve” in April.
“I don’t think it’s a question of all or nothing in this case,” he said in a Montreal speech.
Brenneman said that if a project can be staged in pieces costing about C$1 billion “then you’ve got a construction workforce that is a lot easier to manage. It would take us longer to get there, but it might be a better answer in the long run.”
That is the most encouraging news from the company since it hit the brakes on up to C$2.8 billion in initial spending and C$5.8 billion in overall oil sands expansion when spiraling cost estimates pushed the first phase to between C$4 billion and C$5 billion.
The decision to pull back from conversion of Petro-Canada’s Edmonton refinery to handle 170,000 barrels per day of bitumen from northern Alberta also affected planned development of its 80,000 bpd Meadow Creek project, expected to cost about C$800 million.
Brenneman said at the time that Petro-Canada was concerned that producing too much raw bitumen could saturate the market.
Details of the review will be made public in the next month. Costs of Kyoto Protocol still a worry Meanwhile, Brenneman has raised his on-going worries about the costs of the Kyoto Protocol with Paul Martin, who becomes Canada’s next prime minister on Dec. 12.
He said the government under Jean Chrétien has been too “prescriptive” in telling the industry how to reduce greenhouse gas emissions to Kyoto levels — a rigid stance he is hopeful Martin is willing to change.
“If we really want to tackle this issue we should be encouraging technology development because that’s the way we can solve this problem,” he said.
But he cautioned that technological advances cannot be achieved within the Kyoto timetable, which requires Canada to cut gas emissions to 6 percent below 1990 levels between 2008 and 2012.
“I’m forced to say no to almost every innovative but unproven idea that comes to me for a new technology investment that might improve energy efficiency,” Brenneman said.
“That’s because I can’t guarantee that the investment will pay off in reduced emissions by the time the Kyoto deadline arrives.” Investments wouldn’t pay off within Kyoto’s timeframe He believes Martin understands “how critical it is to foster private-sector innovation in Canada to address these daunting (environmental and climate change) challenges.”
Petro-Canada’s original plans involved using a hydrogen-injection process to convert raw bitumen into light sweet crude — a costly approach, but one that would have generated lower carbon-dioxide emissions.
The more traditional coking process used by Syncrude Canada, the world’s largest synthetic crude producer, emits more carbon dioxide than hydrogen-injection and results in more sour crude that sells at a discount to light sweet crude.
Brenneman, referring to concerns among oil sands operators over the rising costs of natural gas, said it might be “more logical to burn petroleum coke instead ... (to) preserve natural gas for premium uses like home heating where it belongs.”
But he has been forced to veto a proposal to seek an environmentally friendly way to burn coke because there is no guarantee that the investment would reduce emissions within the Kyoto timeframe.
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