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Juniors jump on oil sands bandwagon Synenco sets timetable; Petrobank relies on new technology Gary Park Petroleum News Calgary correspondent
Two ambitious Canadian juniors have tossed their hats into the oil sands ring, hoping to capitalize on growing U.S. interest and a surplus of worldwide capital.
Four years after it was formed, privately held Synenco, backed by a wealth of oil sands experience, has moved to the next phase of a C$4.5 billion project.
Assuming regulatory approval in 2005, the company has set a three-stage development target for its 100,000 barrels per day Northern Lights project.
Chief Executive Officer Michael Supple, a former executive vice president at oil sands pioneer Suncor Energy, said the timetable calls for a 2008 start up and peak production in 2010. 700 million barrels recoverable Synenco’s 48-square-mile permit 60 miles north of Fort McMurray is estimated to hold 700 million barrels of recoverable reserves, with prospects of an additional 1.5 billion barrels.
There is also a coal lease covering 145 square miles that Synenco has previously indicated could replace natural gas as the basic feedstock for upgrading the raw bitumen.
The company said last year that the high-quality coal is unique in the region and offers long-term assurance of hydrogen and power supplies for Northern Lights.
Financed so far by wealthy individuals, Synenco hopes to raise C$100 million in additional private equity in 2004, then turn to public markets in Canada, the United States and elsewhere if it proceeds to a full-scale venture.
It has not closed the door to taking on partners, but Executive Vice President Christopher Hopkins, also a former Suncor executive, told the Financial Post that Synenco has all the expertise it needs.
“We have the ability to do this project,” he said. “What we lack is some financial capability, although we have managed to finance it.”
Supple is especially confident that the world is “very long in cash right now and very short on (investment) opportunities” which should make Northern Lights financially possible.
In addition, the demand for Canadian oil is growing in the United States, where Energy Secretary Spencer Abraham has said it might be a “good thing” if Canada can be a bigger source of oil. Petrobank also in heavy oil field Meanwhile, Petrobank Energy and Resources has become the latest Canadian junior to enter the heavy oil field with plans for an innovative project in northeastern Alberta.
It is currently weighing financing options from investors and a potential partner for a C$30 million fireflood pilot, designed to upgrade heavy oil and bitumen within the reservoir.
Petrobank is also hoping for regulatory approval by mid-2004 from the Alberta Energy and Utilities Board, in hopes of launching a start-up within 12 months.
The toe-to-heel air injection upgrading technology was developed 10 years ago at the University of Bristol in England. Petrobank acquired the rights earlier this year.
Air from an injector well ignites oil in the reservoir, producing a vertical wall of burning crude that heats the oil and allows it to flow down a horizontal well.
The inventors claim toe-to-heel air injection will convert bitumen into 20-degree API gravity crude within the reservoir.
Petrobank Heavy Oil Vice President Chris Bloomer said the pilot is intended to provide proof that the technique actually works.
Of the C$30 million investment, C$9 million is needed for three horizontal wells, vertical air injectors and a series of observation wells.
Toe-to-heel air injection is seen as an alternative to the steam assisted gravity drainage technology that relies on natural gas to separate bitumen from the oil sands.
Petrobank president and chief executive officer John Wright said steam assisted gravity drainage is causing financial, environmental and political problems as gas reserves decline in the Western Canada sedimentary basin.
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