Alberta approves Husky's Sunrise oil sands project

By OGJ editors
HOUSTON, Jan. 21 -- Husky Energy Inc. said it had completed front end engineering and design (FEED) for Phase 1 of the Sunrise oil sands project and has obtained the approval from the Alberta Environment Department and the Energy Resources and Conservation Board (ERCB) to proceed with the project.

John CS Lau, Husky president and chief executive officer, said the company has reduced the overall cost estimate for Phase 1 by more than $1 billion through design optimization so that the project now has a sustainable economic return.

With the FEED work complete and regulatory approval for the amended design in place, Husky will issue requests for proposals (RFP) for the central plant and field facilities. It currently is building the first five well pads and will finalize the site preparation for the central facilities this year.

Pending project sanction by Husky and its partner BP PLC, Husky expects the detailed engineering, procurement, and construction phase of the project to start in the second half, with Phase 1 production anticipated in 2014.

Sunrise lies 60 km northeast of Fort McMurray and will use steam-assisted gravity drainage (SAGD) to produce the estimated 3.7 billion bbl of proved, probable, and possible reserves. Husky said 0.13 billion bbl are proved, 1.9 billion bbl are probable, and 1.7 billion bbl are possible.

Husky has a 50% working interest in the project. It estimates the capital cost for Phase 1 (60,000 b/d) as $2.5 billion, down from the earlier forecast of $3.8-4 billion in the original design plan.

Under current regulatory approvals, Husky expects production to ramp up to 200,000 b/d after completion of all planned phases in 2020.

In 2008, Husky and BP formed two 50-50 partnerships, a Canadian oil sands partnership operated by Husky and a US refining limited liability corporation operated by BP.

The Sunrise oil sands project, jointly owned by Husky and BP, will combine bitumen production with existing refining. Husky considers the integrated project to be most cost efficient and represent a responsible approach to resource development and environmental stewardship.