BP, Husky Energy to form oil sands partnership

Dec. 5, 2007
BP will join Husky Energy in developing Sunrise oil sands field in northeast Alberta under a joint $3 billion investment plan, marking its entry into this sector for the first time.

Uchenna Izundu
International Editor

LONDON, Dec. 5 -- BP PLC will join Husky Energy Inc. in developing Sunrise oil sands field in northeast Alberta under a joint $3 billion investment plan, marking its entry into this sector for the first time.

In exchange, Husky will acquire one half share in BP's Toledo, Ohio, refinery, meaning that both will create an integrated North American oil sands business. Two independent 50-50 joint ventures will be formed from the equally valued assets to own and develop the businesses, BP said.

Under the agreement, BP will take one half share in Sunrise, which is expected to produce a peak of 200,000 b/d of bitumen by the end of the next decade with a 40-year production plateau.

The companies will use steam-assisted gravity drainage, a tested technology which heats the bitumen within the reservoir, allowing it to flow to the surface. "The bitumen will be piped to Hardisty, Alta., from where it will be transported via existing pipeline networks for refining," BP said.

Front-end engineering is expected to be finished in early 2008 and the field will be developed under a three-phase plan. Sunrise has been fully delineated by the drilling of 650 appraisal wells.

The deal represents a major development for BP in enhancing the security of North America's transportation fuels as the 155,000 b/d Toledo refinery will also be upgraded under a joint investment of $2.5 billion.

Currently the refinery has a capacity of 60,000 b/d for heavy oil, which will be increased to process 170,000 b/d of heavy oil and bitumen by 2015 following regulatory approval. It will be operated by BP as a US refining limited liability company.

Bob Malone, chairman and president of BP America, said the investments will increase clean fuels production by as much as 600,000 gpd.

Full regulatory approval of the proposed deal and final commercial agreements are expected to be completed in first quarter 2008, with a partnership effective date of Jan. 1, 2008.

Contact Uchenna Izundu at [email protected].