Oil sands firms eye cost controls
A new take on development favors staged development
A more measured pace of development is taking hold in the formerly red hot bitumen belt. “We’ve learned a lot, some of it the hard way,” admits Jess McConnell, vice-president of Canadian capital projects for ConocoPhillips Canada. The disciplined approach aims to control construction costs. “Labor is a huge challenge,” McConnell told supply chain firms in Edmonton this spring.
The methodical approach drives in situ underground extraction projects revived since January. Smaller designs, using steam-assisted gravity drainage wells, typically grow in phases and at lower volumes than mega-mines. That makes cost spikes for everything from contractors to cups of coffee less likely. “I think you’ll see a little more constraint,” says Oil Sands Developers Group president Don Thompson.
But growth is still substantial. ConocoPhillips Canada and Total E&P Canada Ltd. are starting the second phase of their Surmont project. By the end of 2010, production will reach 90,000 barrels of bitumen per day, more than quadrupling previous output of 21,000 barrels. Phase 2 will add another 83,000 barrels by 2015.
Although ConocoPhillips Canada sold its nine per cent interest in Syncrude Canada, McConnell says, “We’re still committed to developing oil sands. We’re still committed to being the biggest bitumen producer in Canada.” His firm’s long-range outlook sees potential to produce upwards of 900,000 barrels a day from its remaining array of Alberta bitumen assets.
Over the next five years, ConocoPhillips will invest $300 million in heavy oil technology to cut steam use and improve environmental performance. Capacity at Surmont alone will ultimately top 400,000 barrels a day, McConnell predicts. But the growth will take time. “When we talk about producing barrels of oil out of oil sands, we’re not talking about a few years,” he says. “We’re talking probably 40-year type of investments.
Cenovus Energy Inc. uses a similar approach at Foster Creek and Christina Lake southeast of Fort McMurray. Production at Foster Creek, a joint venture with ConocoPhillips, currently tops 100,000 barrels daily. The first two pilot phases of Christina Lake, another Cenovus-ConocoPhillips partnership, produce 15,000 barrels a day.
“One of the biggest challenges for the oil sands has been cost blowouts,” acknowledges Cenovus new resource plays vice-president Ian Young. “We feel that we distinguish ourselves on cost structure.” Development stages use duplicate installations. “We like the concept of repeatable designs with phases of the same size.” Young says.
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