ExxonMobil joins oil sands club

Sister companies, Imperial Oil and ExxonMobil, are taking a headlong plunge into the oil sands, with plans to spend as much as C$6.5 billion on a joint project, while Imperial has set ambitious targets for its well-established Cold Lake heavy oil venture.

Imperial, owned 69.6 percent by ExxonMobil, and the Canadian unit of ExxonMobil filed regulatory applications July 12 for the Kearl mining project that they hope will come on stream at 100,000 barrels per day in 2010 and eventually grow to 300,000 bpd of bitumen by 2018, with a lifespan of 50 years to exploit the reserve of 4.4 billion barrels.

For ExxonMobil it is the first direct investment in the oil sands, where capital investment over the next decade is currently projected at close to C$90 billion.

TD Securities, in a summary of the Kearl project earlier in July, observed that the venture is backed by the “very deep pockets of Exxon.”

If Kearl gets clearance from the Alberta Energy and Utilities Board and Alberta Environment, construction could start in 2007, employing a workforce of 2,000 and eventually offering 1,000 permanent jobs.

Imperial has a refinery in Edmonton to process some of the bitumen output, but analysts expect that production will also likely be shipped to ExxonMobil refineries in the United States.

Imperial, with an estimated 70 percent working interest, is the designated operator, but the final partnership stakes will be settled in 2006 following an evaluation of results from a 2005-06 winter program.

Meanwhile, Imperial said it expects to drill 3,000 wells over the next 15 years to sustain and possibly increase production at its wholly owned Cold Lake heavy oil project which started commercial production 20 years ago in northeastern Alberta.

Cold Lake currently pumps an average of 135,000 bpd and has so far yielded about 750 million barrels of bitumen, including pilot projects that began in 1966.

Eddie Lui, Imperial’s vice president of oil sands development and research, told a TD Newcrest forum earlier in July that on-going research has seen recovery of bitumen in place grow from 15 percent to 25 percent and new processes are achieving rates of better than 30 percent.

Prior to Cold Lake’s commercial debut, about C$350 million was spent on research and up to C$50 million is now invested annually on in-situ and recovery research, he said. Imperial, having received regulatory approval in 2004 to introduce two new areas of Cold Lake, is still weighing those opportunities, Lui said.

The options include the possible use of new technology that has added 50 percent to bitumen production during a pilot project.

At the Kearl Lake oil sands leases, about 800 wells have been drilled so far, confirming that “we have a very high quality ore body,” Lui said.

—Gary Park