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Big plans, big challenges for Canadian oil plays, market access
Gary Park for Petroleum News
Two of Canada’s biggest oil plays have received a long-range vote of confidence at the same time efforts to access new markets for Canadian oil have suffered more setbacks.
Imperial Oil announced a C$2.6 billion plan to proceed with a 75,000 barrels per day oil sands operation in Alberta, while the Newfoundland government’s regulatory board, for the first time in two years, has approved winning bids of C$1.38 billion for prospective offshore exploration blocks.
Imperial said it intends to build the Aspen project, which would boost its output from the region to 300,000 bpd after a scheduled startup in 2022.
The company has based its plans on gaining access to new pipeline capacity, which observers predict will ease export bottlenecks and restore the balance between bitumen and conventional crude.
String of delays But those hopes coincided with another in the string of delays over the past 11 years for TransCanada’s 800,000 bpd Keystone XL pipeline connecting to the Texas Gulf Coast.
This time a Montana court judge ordered a halt to XL construction, ruling that consultation with state landowners and indigenous tribes had been inadequate.
At the same time, Michigan’s newly elected Gov. Gretchen Whitmer promised she would take immediate action to “decommission” Enbridge’s 540,000 bpd Line 5, which is designed to run between Lake Michigan and Lake Huron to Imperial’s refinery and petrochemical complex in Ontario.
Enbridge would not say whether it believes Whitmer can scuttle the C$500 million project.
Imperial Chief Executive Officer Rich Kruger told reporters his company believes the “dust will settle” on transportation issues during the three and a-half year construction period for Aspen.
“We’re confident it will be a globally competitive investment,” he said, while acknowledging that Imperial is counting heavily on governments to ensure pipelines are built.
Kruger also noted that the Aspen operation will reduce carbon emissions and water use by up to 25 percent by deploying “pace-setting or new technologies” that creating a “place for those select projects to compete in the global energy world.”
Aspen called ‘watershed moment’ Kevin Birn, IHS Markit’s director of Canadian oil sands, said the Aspen plan is “a watershed moment in terms of sanctioning of a greenfield project (and) the promise of emissions intensity reductions.”
He said the cost of adding new production from Aspen is about 30-40 percent lower than industry averages seen during the boom times in 2014.
Newfoundland’s Natural Resources Minister Siobhan Coady said the successful bids in her province include a record single offering of C$621 million from Australian-based BHP Billiton Petroleum.
However, she cautioned that the investment spending, assuming the proposals resolve environmental, safety and resource-based concerns and further exploration drilling in the deepwater prospect, would be extended over nine years.
One observer, Rob Strong, underscored that aspect by noting that six drilling projects are currently waiting for approval from the Canadian Environmental Assessment Agency, estimating the latest bids could take three years to get their approvals in place.
- GARY PARK
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