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The Globe & Mail (Canada): Massive project gets started in oil sands

Total SA needs 4,000 workers for bitumen upgrader near Edmonton
DAVID EBNER

May 8, 2007

CALGARY — Total SA took the first step yesterday toward building a multibillion-dollar bitumen upgrader near Edmonton, a construction project that will require 4,000 workers – about what it took to build the iconic Hoover Dam.

Huge oil sands projects have become almost commonplace, but their enormous scale is still impressive. Each effort requires a work force that would populate a small town.

In the 1930s, it took an average of 3,500 workers – and a peak contingent of 5,200 – to build the Hoover Dam near Las Vegas, one of the largest construction projects undertaken to that date.

Relatively speaking, several Hoover Dams are being built in Alberta right now – and Total, a French energy giant, just proposed another one.

“The oil sands in Canada are of interest to us because they have all the elements we like about projects. They’re technically challenging, they’re long term. A company like ours has the ability to add significant value,” Michael Borrell, president of Total’s Canadian operations, said in an interview.

When Total arrived in the oil sands in 2005, paying $1.7-billion for upstart Deer Creek Energy, it was already challenging to pursue a major development. Since then, costs have soared ever higher, driven by global demand for key materials such as steel, and demand for construction workers.

But Total, which operates around the world, is not daunted. It plans to spend $15-billion over the next decade in the oil sands, including its upgrader, as well as two phases of a mining project that would produce roughly 200,000 barrels of bitumen a day to turn into synthetic oil. Total is also involved in a smaller project with ConocoPhillips Co.

For its upgrader, Total wants to build just northeast of Edmonton, a strategy first used by Shell Canada, hoping that proximity to a major city will help attract labour.

“Finding skilled workers in Alberta is clearly one of the challenges facing the whole industry,” Mr. Borrell said.

This summer, as many as 7,000 construction workers will be on the site of Canadian Natural Resources Ltd.’s Horizon project, which features an oil sands mine and upgrader north of Fort McMurray. The expansion of Royal Dutch Shell PLC’s Athabasca mine and its Scotford upgrader near Edmonton employ about 2,000 workers right now, with a peak of more than 6,000 next year.

An upgrader is a sprawling industrial facility where bitumen, a mixture of sand and oil, is put through searing processes where the sand is stripped away from the oil and the low-grade crude is upgraded into synthetic oil. Total plans to use a method that’s called delayed coking, a widely employed and proven process.

Detailed engineering of the upgrader is set to start next year. Yesterday, Total said it had submitted its initial public disclosure document.

“We’re confident that we can find the staff of the skill level we need, which is high, in the local environment,” Mr. Borrell said, noting that the facility will be run by about 400 workers once it’s operational.

The first phase of the upgrader, which would produce 130,000 barrels of synthetic oil, could be running in 2013 or 2014, Total said.

When Total arrived in Canada, it hoped to have oil sands production going in 2010, but last summer pushed that goal back to 2012 or 2013. A public review of the mining portion of Total’s plans could occur late this year.

And while there has been dire chatter among some oil executives about threats to the oil sands, with new rules on greenhouse gases and a potential increase in provincial royalties, Total is the second large international energy company in the past two weeks to announce it is proceeding with a major development. Statoil ASA of Norway in late April paid $2.2-billion to buy an undeveloped property, saying it can overcome the various challenges.

 

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