Two Oil-Sands Projects Get Green LightGreat news for ENT, as it's going keep their fleet busy for years to come!
CALGARY—Two major Canadian crude-oil projects will proceed, including the long-delayed Fort Hills project led by Suncor Energy Inc. (SU) and the smaller Carmon Creek project from Royal Dutch Shell PLC (RDSA), signaling the industry's commitment to growing production in Western Canada's oil sands.
Suncor Energy Inc., Canada's largest oil and gas company, and its joint-venture partners will spend 13.5 billion Canadian dollars ($12.9 billion) on the Fort Hills mine, which analysts say is the biggest investment in an oil-sands project to date. The move marks a major commitment to expanded crude output from northern Alberta's boreal region, which is opposed by environmentalists who say it contributes to an increase in greenhouse gases and disturbs wildlife and wetlands.
"Fort Hills is a significant contributor to Suncor's overall growth strategy," Suncor Chief Executive Steve Williams said on a conference call Thursday.
The Calgary, Alberta-based company announced the project late Wednesday to develop and operate Fort Hills, which is expected to produce 180,000 barrels a day of oil when it reaches full capacity and have a mine life of more than 50 years. The decision comes five years after plans for the site were shelved owing to rising construction-cost estimates and an unclear demand outlook amid the onset of global recession.
"It looks to me like the largest single-phase mine ever built," said Mike Dunn, an analyst at FirstEnergy Capital in Calgary. "They are in a much better position to fund it than they were five years ago" when it was owned by Petro-Canada, which Suncor took over in 2009, he said.
Suncor has a 40.8% stake in the project. Its partners are French oil company Total SA, which has a 39.2% stake, and Canadian diversified miner Teck Resources Ltd., with 20%. Production is expected to begin in late 2017 and ramp up to 90% of capacity within 12 months.
"We don't see too many big projects like this going on in the market," said Andre Goffart, CEO of Total's Canadian unit, in an interview. "It will be a significant contributor to our production," he said.
Total produces about 12,000 barrels a day in Western Canada and projects an additional 50,000 barrels a day from another oil-sands project expected to start in 2015.
Separately, Shell said it will move ahead with its 100%-owned Carmon Creek project, which is expected to produce up to 80,000 barrels of oil a day. It didn't disclose the estimated cost of the project. A spokesman for Shell's Canadian unit said Carmon Creek is expected to begin production "around 2017."
For the larger Fort Hills project, Suncor officials said they didn't expect to have difficulty shipping the heavy oil to markets despite opposition to pipeline projects such as TransCanada Corp.'s proposed $5 billion Keystone XL expansion from Alberta to the U.S. Gulf coast.
"We have no market access issues. We have plans in place which will take all of our base barrels and all of our growth barrels to market," Mr. Williams said. He said rail shipments would account for part of those planned shipments, but not what he termed a "significant" increase.
In the third quarter, Suncor's oil-sands operations produced 396,400 barrels a day of oil, up 16% from a year earlier.
Suncor, whose Fort Hills investment will total about C$5.5 billion, already is one of the largest oil sands operators in Alberta, including both open-pit surface mines like Fort Hills and so-called in situ operations that use steam to pump bitumen, or heavy oil, from subterranean wells.
The move to go forward wasn't unexpected, as Suncor had said it planned to make a decision by the end of this year.
Mr. Williams said the new project will be competitive even at bitumen prices as low as $50 a barrel, which is about $10 below the current price for the Albertan heavy oil. He also said Fort Hills will comply with provincial regulations designed to reduce the growth of tailings, which are a waste byproduct of oil-sands mining that are toxic in high concentrations.
Canadian pipeline operator Enbridge Inc. ENB.T +0.60% said it has been selected by Suncor and the Fort Hills partners to build a new C$1.6 billion pipeline to transport oil from the Fort Hills project and Suncor's existing oil-sands operations to its mainline hub at Hardisty, Alberta.
https://online.wsj.com/news/articles/SB10001424052702304073204579169561525013976