February 2006 ISSUE
doing business
Suncor Reaches
Billion Barrel Milestone
BY NORDAHL FLAKSTAD
Freelance Writer
Suncor Energy Inc. has produced its billionth barrel of synthetic crude since start-up of its Fort Murray oil sands operation in 1967.
Based on current output of 260,000 barrels a day, the next billion barrels should take just over 10 years to produce. However, that target will be reached sooner, given that Suncor plans to begin a $5.9-billion expansion in 2007 that will increase production to 550,000 bb/d.
The company announced it is increasing its capital spending this year by 30 per cent to $3.5 billion, with much of it going into the expansion.
EnCana Remains
In Selling Mode
EnCana Corp. will con-tinue its divestiture program by selling off more conventional
oil and gas properties in Western Canada in the coming year, says Randy
Eresman, P.Eng., the company’s new CEO. The statement follows a year in which EnCana
conducted an active selling program of exploration properties and production
lands in Latin America.
On another front, discussions by EnCana and Valero Energy to convert the latter’s Lima, Ohio, refinery to handle heavy oil have broken off.
Said Valero Chief Operating Officer Bill Klesse: “We had a series of good discussions with EnCana, but at the end of the day, the $2 billion cost to convert our 170,000 barrel-per-day Lima refinery just did not allow for returns that were sufficient to compete with our other strategic investment opportunities.”
Spar Stays in Air
With New Contracts
Spar Aerospace Ltd. of Edmonton has announced two new maintenance contracts for
C-130 transport aircraft. They include a four-month, $25-million contract with
Canada’s Department of National Defence. It extends until April 30, 2006,
a contract that began in 2001 and was scheduled to expire at the end of 2005.
Last year Spar lost out in its bid for a renewed multi-year C-130 contract with DND.
Meanwhile, Spar has won a contract to replace the outer wings of C-130s of Norway’s military. That work will start in May 2006.
Oil Sands Industrial Zone
Shifted to Back Burner
Alberta has set aside a controversial strategy to earmark vast tract of land
in the province’s oil sands as an industrial zone.
The Mineable Oil Sands Strategy, first announced in October, was seen as a way to streamline oil sands development. But the plan for a 2,800-square-kilometre zone drew objections from environmental, aboriginal and other groups.
Under a new approach, the province has formed a five-member advisory council with representation from aboriginal and environmental groups, the general public and the oil sands industry.
Synenco Selects
Sturgeon Site
For Upgrade
Synenco Energy Inc. plans a $2.3-billion upgrader near Redwater in Sturgeon County,
about 45 km northeast of Edmonton. The upgrader will be part of the company’s
$5.3-billion Northern Lights oil sand development.
It will neighbour two planned similar facilities — the NorthWest and Heartland upgraders — as well as the existing Scotford upgrader. Synenco will follow a parallel strategy of shipping bitumen south from the Fort McMurray region for upgrading.
Forty-per-cent owned by China’s Sinopec Corp., Synenco would draw its feedstock from its Northern Lights leases, 100 km northeast of Fort McMurray. It plans to build the upgrader in two 50,000 bb/d phases, with the first stage expected to be completed in late 2010.
Enbridge May Enlarge
Plans for Gateway Pipeline
Following consultation with potential shippers, Enbridge
Inc. is contemplating
increasing — from 30 to 36 inches — the size of its proposed $4-billion
Gateway Pipeline.
The line is scheduled to carry oil sands production from Edmonton to Kitimat, B.C., starting in 2010. The change would more than double to 800,000 bb/d the amount of oil the line could carry.
In a related development Enbridge Pipelines (Athabasca) Inc. has filed an application for regulatory approval for the Waupisoo Pipeline. Enbridge will construct the 30-inch, 380-km pipeline for $400 million to transport crude from the Alberta oil sands to Edmonton.
The line’s initial capacity will be 350,000 bb/d, with a maximum capacity of 600,000 bb/d. The project’s scope also includes a 16-inch, $200-million diluent return line, which would operate from the Edmonton-area refinery hub north to the oil sands.
Reduced Farm Emissions
Provide Offsets for EPCOR
EPCOR Utilities Inc. will purchase Canadian greenhouse gas offset credits generated
from farming operations under contract with AgCert Canada Ltd.
The subsidiary of AgCert International PLC of Dublin, Ireland, will deliver 100,000 tonnes of CO2 equivalent offsets to EPCOR per year, from 2006 through to 2012. These offsets are to be generated consistent with the standards of the Canadian Offset Program Authority, which will be established in early 2006.
“EPCOR is serious about mitigating greenhouse gas emissions and doing our part to support Canada’s greenhouse gas management commitments,” said Dr. David Lewin, P.Eng., EPCOR senior vice-president of environment. “By working with AgCert, we have secured high value Canadian offsets that are authentic and verifiable and have taken action to support a stronger offset market within the country.”
Power Corridor
Meets Resistance
Opposition is growing to proposals for a north-south, 500-kilovolt power transmission
line, which would parallel the highway between Calgary and Edmonton.
Last year, the Alberta Energy and Utilities Board provided preliminary agreement on the need for the project. Final review and AEUB hearings have been scheduled for later this year.
However, organized opposition to the proposal is being mounted through the United Power Transmission Area Groups, an organization that says it now counts more than half the 2,500 landowners along the corridor among its supporters.
Project proponents are the Alberta Electric System Operator, AltaLink and EPCOR.
Air Products Building Plant
Air Products Canada Ltd. will construct a 105-million-cubic-feet-per-day hydrogen
production plant to serve Petro-Canada’s Edmonton refinery and several
other customers in the Alberta Heartlands industrial corridor. The facility,
to be owned and operated by Air Products under a long-term agreement, is expected
to be on-stream in April 2008.
This is the second facility to be constructed by Air Products to supply hydrogen to Petro-Canada’s Edmonton refinery and other nearby customers.
A 71-million-cubic-feet-per-day facility is currently under construction and scheduled to be on-stream in April. The two connected hydrogen facilities will be adjacent to the Petro-Canada refinery.
CN Rail Bumps Up
Capital Spending
Canadian National Railways plans to spend more than $1.5 billion on capital programs
in 2006, an increase of nine per cent over 2005.
CN will spend about $800 million on infrastructure, replacing rail, ties,
ballast and other track material, and upgrading bridges and signalling systems.
Also planned is close to $250 million in spending on network productivity initiatives
and strategic projects. These including siding extensions in Western Canada,
investments in the company’s Prince Rupert, B.C., corridor, and the reconfiguration
of Johnston Yard in Memphis, Tenn.
Imperial Outlines
Plans for Upgrading
Of Kearl Production
Imperial Oil Ltd. will service production from its planned $6.5-billion Kearl
oil sands development by using the company’s existing Canadian refining
capacity. That means it won’t need to build a dedicated upgrader.
In another development, Imperial and ExxonMobil Canada have announced the sale for $480 million to ARC Resources Ltd. of various assets. These include Imperial’s interests in the Redwater field, operated by Imperial, as well as its interest in the North Pembina field, operated by ExxonMobil. Also being sold are ExxonMobil Canada’s interests in the North Pembina field.
North American Wins
Major Mine Contracts
North American Enterprises Ltd. of Acheson Industrial Park, near Edmonton, is
the successful bidder on a two-year contract for site preparation at De Beers
Canada Inc.’s new, $982-million Victor Bay diamond mine, on the James Bay
coast in Northern Ontario. The project was approved last fall.
North American also has been awarded a five-year land reclamation at Syncrude
Canada’s Mildred Lake mine, north of Fort McMurray.
AEUB Gives Green Light
To Husky for Sunrise
Alberta Energy and Utilities Board has approved Husky Energy
Inc.’s bitumen
extraction plans for its Sunrise oil sands project, 60 km northeast of Fort McMurray.
Husky holds 100 per cent of the Sunrise leases and plans to develop it into a 200,000 bb/d operation in stages. Husky continues to study its options for upstream development, upgrading and transportation of bitumen.
Meanwhile, Husky has announced it will spend $2.85 billion in 2006 to develop oil-producing properties, with $1.5 billion of that channelled into Western Canada.
De Beers Seeks Permit
For Third Diamond Mine
De Beers Canada Inc. has applied to the Mackenzie Valley Land and Water Board
to construct and operate a mine at Gahcho Kué, Kennady Lakes, N.W.T.,
300 km northeast of Yellowknife. The project is a joint venture between De Beers
Canada (51 per cent), Mountain Province Diamonds Inc. (44.1 per cent) and Camphor
Ventures (4.9 per cent).
Gahcho Kué is located 90 km east of Snap Lake, where De Beers’ first Canadian diamond mine is under construction.
Proposed is an open pit mine with an estimated resource of 31 million tonnes. Construction costs are estimated at $825 million. It will employ up to 600 people during the peak of the three-year construction schedule and close to 400 people during operations.
The project is expected to produce an average of three million carats a year for its 20-year life.
Harvest and Viking
Agree to Merge
Harvest Energy Trust and Viking Energy
Royalty Trust have unanimously approved
an agreement to merge. The combined trust, which will retain the Harvest name,
will have an initial enterprise value in excess of $4 billion.
Shell Expands
Western Gas Positions
Shell Canada Ltd. acquired an interest in about 110,000 acres of land at a recent
Crown land sales in Alberta and British Columbia. Shell has continued to expand
its land position in unconventional gas with the acquisition of 66,400 acres
in the deep basin area near Hinton.