Measured development ideal for megamines, Nexen Inc. VP says
Oil sands megamine projects are keeping in step with construction costs and energy price outlooks
As on the stage, timing matters in the oil sands. “You’re going to be better off to be an early mover rather than a late one,” says Gary Nieuwenburg, synthetic crude vice-president of Nexen Inc.
He was explaining the ideal, slow development rhythm of the northern Alberta bitumen belt at an unconventional oil forum held by TD Newcrest. To catch the next energy wave – by having new output ready to go at the sweet moment when construction costs head down and product prices turn up – Nexen and Opti Canada Inc. worked through the recession on the first in a planned series of 60,000-barrels-daily additions to their Long Lake project.
The design and engineering job kept going while the initial plant, finished in 2008, built up inaugural production south of Fort McMurray. Like the growth planning, the months-long startup was a predicted but still annoyingly gradual exercise in putting new technology to work. Investment analysts, marching to the faster beat of quarterly financial statements, circulated skeptical research notes on the production methods and the companies.
“We want to ensure we’re sanction-ready,” Nieuwenburg said, referring to the corporate procedure of management presenting the board of directors with a project ready for construction and needing only the final seal of commercial approval. “We’re not at the bottom of the cost cycle.” The time to build will arrive in 2011 or ’12, he predicted.
Enter Imperial Oil Ltd., reviving oil sands development with its 100,000-barrels-daily Kearl project on the ideal schedule that the Long Lake partners hope to match. Construction will peak with about 1,700 workers at the bitumen mega-mine site in 2011–12, company spokesman Pius Rolheiser reports.
Between $500 million and $1 billion was saved, curbing forecast costs at $8 billion including allowances for surprises, by delaying commercial sanction and revisiting details while the economy cooled off for a few months, Imperial chairman and CEO Bruce March told financial analysts. The pause was part of a standard company pattern of hard planning and bargaining with suppliers and contractors. The methodical approach throttles down projects to a wary walk that is a trademark of the Canadian industry’s 129-year-old elder sister, nicknamed Mother Esso by veterans.
The mining program mimics the staged approach to oil sands development that Imperial pioneered during the industry’s lean 1980s and ’90s with its in-situ, underground extraction project at Cold Lake. An eventual target of 345,000 barrels a day is set for Kearl, with the timing of two more 100,000-barrels-plus phases to be determined by economic conditions.
Markets will also guide potential bitumen upgrader additions for making higher-value synthetic oil. Those investments look much farther off than mine expansions. The main oil sands customers, refineries in the United States, have capacity to take the lower-grade product and are building more in response to a worldwide trend towards increased supplies of heavy crude, Imperial has told Alberta’s Energy Resources Conservation Board.
In Kearl’s case, the planning and approval process lasted 12 years. Mobil Oil Canada announced the project in April of 1997. Imperial took over following the 1999 merger of its 70 per cent owner, Exxon Corp., with Mobil Corp.
Pages: 1 2
Issue Contents
Entries