EnCana sidesteps oil sands ‘capital risks’

Gary Park

By unloading its two northern Athabasca oil sands leases, EnCana has withdrawn from the mining sector and opted to concentrate on “in-situ” underground operations.

Chief Executive Officer Gwyn Morgan told a conference call July 27 that EnCana prefers to focus on its strengths rather than expose itself to the “significant capital risks” of oil sands mining that has contributed to hefty cost overruns for the Syncrude Canada, Suncor Energy and Shell Canada operations.

As a result, EnCana sold its leases to Shell, which will eventually incorporate the properties into its Athabasca project in partnership with Chevron Canada Resources and Western Oil Sands. The sale price was not disclosed.

EnCana will now target 100,000 barrels per day of bitumen production by 2010, using the steam-assisted gravity drainage technology to extract the raw bitumen.

“That’s what we’re the leader at,” Morgan said, noting that the mining operations are a “whole different ball game.”

He forecast that EnCana’s bitumen output at its Foster Creek and Christina Lake sites will increase by about 80 percent to 68,000 bpd in 2008 or 2009, then hit 100,000 bpd by the end of the decade.

Chief Operating Officer Randy Eresman said EnCana is budgeting about C$106 million for each additional 10,000 bpd of production.