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Petroleum News: Scattering some of the oil sands gloom

By Gary Park

Imperial Oil-ExxonMobil Canada, a Shell Canada-led partnership and Husky Energy are pushing ahead with various aspects of large-scale oil sands projects, taking the high road during a time of accumulating negatives.

The joint effort by the ExxonMobil sister companies involves the 300,000 barrel per day Kearl project that carries an initial cost projections of C$4.5 to C$6.5 billion to recover 4.41 billion barrels of bitumen over 50 years, is ready to enter the regulatory approval stream.

Similarly, Albian Sands Energy — a joint venture by Shell Canada, Chevron Canada and Western Oil Sands — has a regulatory date as it asks for changes to existing approvals to expand its existing Muskeg River mine.

Canada’s Environment Minister Rona Ambrose and Neil McCrank, chairman of the Alberta Energy and Utilities Board, have formed a three-member joint panel to review the two proposals.

They will examine the environmental impacts, decide whether the projects are in the public interest and receive public comments.

Kearl Lake could start construction in 2007

Assuming timely approvals and positive results from project engineering and design work, along with favorable business and market conditions, Kearl Lake construction could start in 2007, resulting in first production in 2010, with two more trains coming on stream in 2012 and 2018.
Although the Albian partners have waved a yellow flag by ordering internal and external project reviews, indicating estimates could soar 50 percent from the initial forecast as they target an expansion by 100,000 bpd to 270,000 bpd, are not ready to bow out of the regulatory process.

Despite any budget misgivings about expansion of the Muskeg River mine, operator Shell Canada said it has taken into account the need for a measured approach in expanding the venture.

That includes a decision to award a contract to ATCO Structures to construct a permanent camp at the site to accommodate 800 people in the first-phase expansion and grow to 2,500.

The partners are also continuing front-end engineering work, reinforcing its hopes that initial oil from the expansion will come on stream as scheduled in 2010.

Husky is contemplating taking a fresh route by building its own rigs for the Sunrise project as one way to get a grip on costs.

It will take Husky another 12 to 15 months to work on the details to effectively become its own drilling contractor for the 200,000 bpd thermal in-situ development.


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