Canadian oilsands projects facing hurdles

Canadian oilsands operators persist with development plans despite new hurdles thrown up before an oil industry bedeviled by low oil prices and retrenchment.

In recent action by Calgary firms:

Suncor Energy Inc. has begun construction of a $2 billion (Canadian) expansion of its oilsands operations in northern Alberta following regulatory approval.
Mobil Oil Canada Ltd. said it is delaying a construction start on a $2.5 billion oilsands project in the same region for 2 years to 2002.
Shell Canada Ltd. is actively seeking another partner in a $3.8 billion (Canadian) oilsands project in northern Alberta after withdrawal of an Australian firm.
Koch Canada Ltd. and UTS Energy said they remain committed to a drilling program and pre-feasibility study for an oilsands project. Koch said its Fort Hills oilsands project in northern Alberta could produce up to 90,000 b/d of bitumen and would not require a full-scale upgrader, given access to the company's refinery at Pine Bend, Minn. A final decision on the project would be made in early 2002. Koch has a 78% interest, and UTS the remainder.

Suncor expansion

Suncor's Project Millennium expansion will increase synthetic crude production to 220,000 b/d from 105,000 b/d, add a second production line and a sulfur recovery plant, and accelerate plans for a new Steepbank mine in the Athabasca area of Alberta. It is scheduled for completion in mid-2001.

The Alberta Energy Utilities Board granted approval for the project but said it will issue conditions of approval later on environmental and other requirements.

Suncor also signed a deal with TransAlta Corp., Calgary, to build and operate a $315 million cogeneration power plant for the oilsands project. The company said it wants to ensure it has a reliable and secure supply of electricity.

The natural-gas fired cogeneration plant will produce up to 360 MW of electricity and 2 million lb/hr of steam. Power not used by Suncor will be sold into Alberta's power grid.

Mobil

Mobil said low oil prices and a decision to use cash elsewhere have forced it to postpone its Kearl oilsands project in the Fort McMurray area of Alberta. The company was close to filing development plans for regulatory approvals.

The company said it still plans to spend $1.2 billion to develop a mining site and an additional $1.3 billion for an upgrader to process bitumen into light syncrude.

Mobil did not say where it will use the cash now but noted it has extensive interests in the Hibernia oil field off Newfoundland and the Sable natural gas development off Nova Scotia.

The company said it will continue preliminary work on the oilsands project, which it now expects to be completed in 2005.

Shell

Broken Hill Pty. Co. Ltd. (BHP) withdrew from a 25% interest in the Muskeg River mine project but will continue to pay for 25% of a $180 million feasibility study.

BHP said equity participation in the project is not in line with its strategic objectives relating to upstream petroleum activities.

Shell has received regulatory approval for a $1.4 billion oilsands mining operation. The project would also include a $1.9 billion heavy oil upgrader at Shell's Scotford refinery, near Edmonton, and the $500 million Corridor pipeline connecting the mine and upgrader.

Shell is expected to make a final decision later this year on whether to proceed with the project. Shell must begin production by 2003 under terms of its lease. The project would produce 150,000 b/d of syncrude as early as 2002, if it proceeds on schedule. The company estimates its potential oilsands reserves at more than 6 billion bbl.