Energy Ink

SNC-Lavalin to build $650 million froth treatment plant

Client not disclosed, but reported to be CNRL

Guest Post

November 08, 2011

Subscribe Email This Post Print This Post Bookmark and Share

Early evidence that global volatility has yet to curb planned capital expenditures in the oil sands for 2012 emerged today care of Montreal-based SNC-Lavalin.

The engineering and construction giant says it has signed a $650-million contract with an oil sands operator to build a froth treatment plant in the Fort McMurray region next year.

The oil sands operator involved has not been disclosed but is reported to be Canadian Natural Resources Ltd., who SNC has previously worked with on its Horizon upgrader.

Production at the facility was temporarily halted earlier this year after a fire tore through a coking unit, causing sales of 92,900 barrels per day of synthetic crude oil to be put on hold through the first quarter of 2011.

A desire to produce a more fungible product – one that could be sold into the market without upgrading – could be behind CNRL’s decision, suggests Bob Dunbar, president of Calgary consultancy Strategy West Inc.

Bitumen produced at Horizon today “is not really clean enough to go into the open marketplace,” he says. “It has to go to a coking-type upgrader.”

A corporate presentation to investors confirms that CNRL has budgeted $720 million next year for one of several expansion phases at the Horizon facility, and that a contract has been awarded for a froth treatment facility.

The processing technique strips bitumen of its heavier hydrocarbon compounds so it can flow in pipelines as a diluted product, giving operators added flexibility. “If you had a situation where bitumen was selling at a fairly high price, you’d have the option of sending it directly to the market or sending it through an upgrader,” Dunbar says.

CNRL is the latest in a string of oil sands firms taking a close look at froth treatment at a time when cost inflation has emerged anew as a threat to expansion plans.

Imperial Oil Ltd., for example, plans to use a variation of the processing technology at its Kearl mega-mine – where projected costs have ballooned to $10.9 billion from initial estimates of $8 billion – instead of building an upgrader to process raw bitumen.

Suncor Energy Inc. has signaled that it, too, will incorporate the processing technique at its Fort Hills joint venture with Total E&P Canada Ltd., if and when that project gets built.

More posts by Jeff Lewis

Follow @AlbertaOilMag

  Follow us on Twitter