Oil shale development scheduled in Australia

A Canadian-Australian combine has agreed to proceed with an oil shale development program in Queensland, Australia.

Phased development at the port city of Gladstone could produce an ultimate 85,000 b/d of oil from the Stuart deposit on Queenslands Coral Sea coast.

In the first phase, combine member Suncor Inc., Calgary, will spend $7 million (Canadian) to conduct preliminary engineering and complete project negotiations. Its partners are Australias Southern Pacific Petroleum NL and Central Pacific Minerals NL, Sydney, which will contribute $3 million to the first phase study.

Suncor will operate the project with a 50% interest. Its Australian partners will share the remaining 50%.

Suncor, one of two producers in Albertas Athabasca oilsands, said the Stuart deposit could hold the equivalent of 3 billion bbl of shale oil. The Australian project is Suncors first venture outside Canada.

Separately, Suncor disclosed plans to spend about $475 million (Canadian) on capital and exploration programs in 1996, a 20% increase from 1995.

The company plans to spend about $260 million on its Alberta oilsands operation, $160 million on conventional oil and gas operations, and $55 million on Sunoco, the companys refining and marketing operation.

Suncor plans to spend more than $1 billion (Canadian) during the next 5 years on expansion of its oilsands and resource groups.

Phased project

The Queensland project involves scaling up from an earlier pilot plant to a Stage 1 demonstration plant expected to produce 4,500 b/d at a capital cost of $217 million (Australian), including $17 million for contingencies. The program will be entitled to research and development tax benefits.

Suncor holds the right to acquire an option for $3.5 million to purchase a 22.4% in Southern Pacific and Central Pacific. The option can be exercised within 6 months after the plant begins operation.

Stage 2 calls for scale up to a commercial module of 14,800 b/d. Full commercial operations will occur at Stage 3, which involves replication of commercial modules to produce 65,000-85,000 b/d and an upgrade to allow a greater range of products.

The agreement anticipates building a second full size commercial unit on which, after a defined period, Suncor will pay its Australian partners a royalty on revenues from its 50% share of production. Royalty will be based on a sliding scale between 2% at a West Texas intermediate price of $20/bbl and 5.5% at more than $35/bbl, both in 1995 U.S. dollars.

To secure development within a reasonable period, either Suncor or Southern Pacific-Central Pacific may proceed, under certain conditions, with development without the other.

Bechtel Corp., San Francisco, agreed in principle to build the plant. It is working toward detailed engineering design and a cost estimate that will corroborate its estimate for a fixed price construction contract with performance guarantees.

The project will use technology owned by the Alberta government and developed by a Calgary engineer, Bill Taciuk. Using a heating process to vaporize shale and extract petroleum, it has been laboratory tested in Calgary with Australian shale.

Southern Pacific and sister company Central Pacific in 1988 signed an agreement with the Alberta Oil Sands Technology and Research Authority for use of the Taciuk process. Bench and pilot testing of different technologies showed the process to be the best suited for use on eastern Queensland oil shale (OGJ, Sept. 11, 1995, p. 64).

The Australian companies said the Stuart deposit could be capable of producing 200,000-250,000 b/d at full development. They called the development agreement with Suncor the first crucial step in development of their resources, which they estimate at 20 billion bbl of shale oil.

Suncor produces 75,000 b/d from Athabasca oilsands and plans an increase at the Alberta site to 104,000 b/d by 2002. Participation in the new venture culminates a year of Suncor study of the project.