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Pondering a partnership Canadian independent wants to own as much of oil sands megaproject as possible; ready to delay completion dates to keep costs under control Gary Park Petroleum News Calgary Correspondent
Canadian Natural Resources remains undecided over whether to take on partners for its C$8.4 billion Horizon oil sands project in northern Alberta.
The Canadian independent has “talked to a number of people, but we’re still evaluating whether we need a partner or not,” Chief Operating Officer Steve Laut said after the company’s annual meeting May 6.
He said CNQ, as Canadian Natural is widely known, has the ability to tackle the mining and upgrading project alone, despite its inexperience in the oil sands field.
“We’d like to keep as much of it as possible,” Laut said. First phase production in 2008 The Alberta Energy and Utilities Board approved an application that calls for a C$5 billion first phase to produce 110,000 barrels per day of upgraded bitumen starting in 2008, followed by a C$2.3 billion expansion to add 155,000 bpd in 2012 and a final stage costing about C$1.1 billion.
Horizon will tap an estimated 18 billion barrels of bitumen in 250 square miles of leases, with about 6 billion barrels recoverable using current technology. The operating life is estimated at 42 years.
CNQ believes it needs a sustained West Texas Intermediate crude price of US$16 per barrel to generate an 8 percent after-tax return, which would rise to 15 percent with oil prices at US$23.
Laut said Horizon will be a “mega-project different from any other mega-project that’s been done in Alberta before.” Cost control ahead of deadlines Against a background of oil sands projects that have piled up cost overruns in the billions of dollars, he said CNQ will put cost control ahead of completion deadlines.
By taking a different approach on engineering, design and labor, Horizon will be “different from the fast track” strategies that have created problems for oil sands developers, he said.
Over the short term, Laut said CNQ will take a proactive approach to heavy oil marketing by increasing its capacity for blending synthetic and heavy crudes, including its “synbit” product that is attracting interest in the U.S. Padd II refining markets as an alternative to medium sour crudes from Africa and the Middle East.
He said CNQ is interested in construction of a conversion facility in Alberta to blend up to 250,000 bpd and, by this fall, hopes to expand its own blending capacity to 140,000 bpd.
Laut said that over the medium term the removal of equivalent volumes of heavy oil from markets in the form of crude oil blends should lower price differentials and enhance the economics of heavy and synthetic oil.
Meanwhile, CNQ has pushed its plans for a steam assisted gravity drainage project adjacent to the Horizon lease beyond 2012.
Real Doucet, vice president for oil sands, said last month that the company aims to utilize the initial infrastructure that the Horizon mining operation has created for the steam assisted gravity drainage venture, which is expected to produce up to 70,000 bpd.
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