Ready for some heavy lifting

Cenovus Energy, Devon Energy ready to move ahead on projects at Telephone Lake, Pike; BlackPearl ready to resume Onion Lake work

Gary Park

For Petroleum News

For all of the question marks swirling around the near-term prospects for Western Canada’s heavy crude, operators show no signs of taking a time out.

Cenovus Energy and Devon Energy are both ready to take advantage of regulatory approvals for two oil sands projects and junior producer BlackPearl Resources plans to resume work on a Saskatchewan heavy oil venture while expanding a similar project in Alberta.

Cenovus said it has obtained approval from the Alberta Energy Regulator and the Alberta government to launch what it describes as a “cornerstone asset” - its wholly owned Telephone Lake project that could eventually yield more than 300,000 barrels per day over 40 years.

The thermal recovery operation is scheduled to come on stream in two phases of 45,000 bpd each, based on confidence that more than 300 test wells over the past 10 years have established a reservoir that has a similar thickness to its existing Christina Lake operation.

Cenovus also reported success from a dewatering pilot project that has demonstrated it can remove a layer of water on top of the oil sands deposit and replace that with compressed air which is expected to improve the steam-to-oil ratio and reduce the environmental impact.

The company said an independent reserves evaluator has given Telephone Lake a best estimate of economic contingent bitumen resources of 2.6 billion barrels, which will be reclassified to proved plus probable reserves once it decides in 2015 on the timing of development.

Cenovus has two operating oil sands projects - Foster Creek with 150,000 bpd of current gross production capacity and Christina Lake at 138,000 bpd.

A partnership of Devon and BP received approval from the Alberta government for the 105,000 bpd Pike thermal project, in which Devon spent C$500 million in 2010 to acquire a half share and take over operatorship.

A Devon spokeswoman said an expected capital budget and work plan should be released this quarter.

FirstEnergy Capital analyst Michael Dunn estimated a greenfield project similar to Pike would carry a capital cost of C$45,000 to C$60,000 per flowing barrel, putting the price tag in the range of C$4.7 billion to C$6.3 billion.

The Pike leases are just south of Devon’s existing Jackfish operation, where work has recently finished on the last of three phases of 35,000 bpd each.

BlackPearl is selling shares and raising its lending facility, opening the door to resume work on its Onion Lake project in Saskatchewan, having decided in June to halt a planned C$350 million debt issue to pay for the 12,000 bpd project because of unstable debt markets for oil sands projects.

It now hopes to raise C$175 million before the end of 2014 to proceed with an initial 6,000 bpd phase.

BlackPearl is also seeking a joint venture partner to develop its planned 80,000 bpd Blackrod oil sands project in Alberta, starting with a 20,000 bpd first phase at a cost of up to C$800 million.

In addition, the company said it will expand its enhanced oil recovery project in north-central Alberta by taking advantage of lower royalty rates the Alberta government introduced during the summer, which BlackPearl expects will cut its current royalties of 22 percent to 5 percent for eight to 10 years.

Based on results from a pilot project, its plans include mixing water and chemicals and injecting them to initially re-pressurize the reservoir and boost recovery rates from the oil in place from 3 percent-5 percent to 18 percent.