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Bloomberg: UTS Energy, Teck Plan C$2.3 Billion Oil-Sands Mine (Update2)

By Ian McKinnon

Dec. 10 (Bloomberg) — UTS Energy Corp. and partner Teck Cominco Ltd. may spend as much as C$2.3 billion ($2.28 billion) to develop an oil-sands mine in northern Alberta.

The mine may start operations by 2014 and produce 50,000 barrels a day of bitumen, a heavy oil extracted from Alberta’a tar sands, Chief Executive Officer William Roach said today in an interview in Calgary. The mine would exploit reserves estimated at about 400 million barrels, he said.

The project, known as Lease 14, is too small to support an upgrading plant to process the bitumen into more valuable synthetic crude, which is used to make gasoline, diesel and other fuels, he said.

“It may get fed into an existing upgrader and would be very attractive for an opportunity like that,” Roach said. “We have had some interest in the asset.”

The mine’s output could be sold to other companies that build upgraders, Roach said. Or Lease 14’s production could connect with an oil-sands mine planned by a Royal Dutch Shell Plc-led joint venture. Shell and its partners are proposing the mine to help boost output at their Athabasca Oil Sands Project, currently a 155,000-barrel-a-day mine and upgrader.

Alberta, Saudi Arabia

Alberta’s oil sands contain the most reserves in the world after Saudi Arabia, according to provincial government estimates. High oil prices, which reached $99.29 a barrel on Nov. 21 in New York, are encouraging Shell, Exxon Mobil Corp. and other companies to spend billions to boost production from the tar-like deposits.

UTS fell 9 cents, or 1.6 percent, to C$5.45 in trading on the Toronto Stock Exchange. Vancouver-based Teck, the world’s second-largest zinc miner after Xstrata Plc, rose 30 cents to C$39.35.

A regulatory application for Lease 14 will likely be submitted later next year or in early 2009, Roach said.

“This would be relatively small project though if we do it as a stand-alone, which we think would be quite attractive to a number of different contracting participants,” he said.

UTS plans next year to drill additional wells to get better estimates of reserves at another oil-sands property it owns with Teck. Lease 311 may contain as much as 2.8 billion barrels of bitumen, Roach said.

“We think it could easily be a 200,000-barrel-a-day resource” that is developed in two stages in the next decade, he said.

To contact the reporter on this story: Ian McKinnon in Calgary at [email protected] .

Last Updated: December 10, 2007 16:28 EST

 

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