Projects hinge on Keystone XL approval
By Dan Healing, Calgary Herald
Oilsands players warned at an industry conference Monday that higher costs and pipeline constraints could derail longerterm expansion plans.
Cenovus Energy Inc. of Calgary plans to grow to half a million barrels per day of oil production by 2021, up from 137,000 bpd in first quarter 2011, but the latter part of that plan could be reconsidered if the Keystone XL pipeline is not approved, said chief operating officer John Brannan.
“Overall, for industry, I think (XL) is important and if it doesn’t go, then obviously (with the) economics we put together for these growth plans, there will be wider differentials, we will have to work harder on an integrated solution,” he said at an industry conference sponsored by the Canadian Association of Petroleum Producers.
The proposed $7-billion Keystone XL pipeline would transport up to 700,000 barrels per day of diluted bitumen from Alberta to refineries on the Gulf Coast of Texas.
Cenovus bitumen is currently going via the existing Keystone pipeline to the refinery in Illinois it owns with partner ConocoPhillips but upstream expansions could outstrip capacity.
Brannan said a surplus of bitumen in the market would increase its discount to light oil prices. He agreed that situation could also prompt more refining in Alberta over the United States.
In another presentation, president Steve Laut said Canadian Natural Resources Ltd. is prepared to put its plans to more than double Horizon integrated mine output to 250,000 bpd on hold if inflation jumps to overheated 2008 levels.
“We remain on track for aggressive expansion at Horizon, and are committed to expand Horizon, but only if capital costs are reasonable and cost certainty can be obtained,” he said. “We know there’s going to be a lot of pressure here in 2013 and 2014 with all the projects that have been announced. That could put capital cost pressure on us. We’ll stop, take a break, if that happens.”
Horizon, with capacity of 110,000 barrels per day of synthetic crude, has been shut down since Jan. 6 when a fire damaged its four coker drums.
Smoke from forest fires then put the repair job three to four weeks behind schedule, Laut noted, but the upgrader is expected to restart in August.
John Myer, vice-president of oilsands for integrated Husky Energy Inc., said costs at the $2.5-billion, 60,000-bpd Sunrise thermal oilsands project it shares with BP so far appear to be covered by the $100-million provision it made for inflation.
Site clearing for the project is complete and the company is drilling horizontal well pairs for steam-assisted gravity drainage production by 2014.
It has approval to expand to 200,000 bpd and is looking at growing beyond that, Myer said, without giving specifics.
He added the company is drilling new wells to try to enhance production at thermal oilsands pilot project Tucker, which started in 2006 but has been underperforming with output of about 6,200 bpd.
Read more: http://www.calgaryherald.com/business/Higher+costs+hurt+oilsands+growth+plans/4941716/story.html#ixzz1PIci41lJ
Cenovus Energy Inc. of Calgary plans to grow to half a million barrels per day of oil production by 2021, up from 137,000 bpd in first quarter 2011, but the latter part of that plan could be reconsidered if the Keystone XL pipeline is not approved, said chief operating officer John Brannan.
“Overall, for industry, I think (XL) is important and if it doesn’t go, then obviously (with the) economics we put together for these growth plans, there will be wider differentials, we will have to work harder on an integrated solution,” he said at an industry conference sponsored by the Canadian Association of Petroleum Producers.
The proposed $7-billion Keystone XL pipeline would transport up to 700,000 barrels per day of diluted bitumen from Alberta to refineries on the Gulf Coast of Texas.
Cenovus bitumen is currently going via the existing Keystone pipeline to the refinery in Illinois it owns with partner ConocoPhillips but upstream expansions could outstrip capacity.
Brannan said a surplus of bitumen in the market would increase its discount to light oil prices. He agreed that situation could also prompt more refining in Alberta over the United States.
In another presentation, president Steve Laut said Canadian Natural Resources Ltd. is prepared to put its plans to more than double Horizon integrated mine output to 250,000 bpd on hold if inflation jumps to overheated 2008 levels.
“We remain on track for aggressive expansion at Horizon, and are committed to expand Horizon, but only if capital costs are reasonable and cost certainty can be obtained,” he said. “We know there’s going to be a lot of pressure here in 2013 and 2014 with all the projects that have been announced. That could put capital cost pressure on us. We’ll stop, take a break, if that happens.”
Horizon, with capacity of 110,000 barrels per day of synthetic crude, has been shut down since Jan. 6 when a fire damaged its four coker drums.
Smoke from forest fires then put the repair job three to four weeks behind schedule, Laut noted, but the upgrader is expected to restart in August.
John Myer, vice-president of oilsands for integrated Husky Energy Inc., said costs at the $2.5-billion, 60,000-bpd Sunrise thermal oilsands project it shares with BP so far appear to be covered by the $100-million provision it made for inflation.
Site clearing for the project is complete and the company is drilling horizontal well pairs for steam-assisted gravity drainage production by 2014.
It has approval to expand to 200,000 bpd and is looking at growing beyond that, Myer said, without giving specifics.
He added the company is drilling new wells to try to enhance production at thermal oilsands pilot project Tucker, which started in 2006 but has been underperforming with output of about 6,200 bpd.
Read more: http://www.calgaryherald.com/business/Higher+costs+hurt+oilsands+growth+plans/4941716/story.html#ixzz1PIci41lJ
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