Chevron Plans 2nd Oil Sands Project in Alberta
Chevron Corp. is doubling down its bet on Alberta's oil sands, saying it aims to spend billions over the next decade to launch a second project.
The company said Thursday it has acquired rights to 73,000 hectares northwest of Fort McMurray — land that Chevron believes holds 7.5 billion barrels of oil.
The initial cost for Chevron is modest, between $50-million and $70-million to acquire two sections of leases. But turning that frozen muskeg into an industrial project will take years, and billions of dollars, said James Bates, vice-president of operations and asset development at Chevron Canada Ltd.
An acquisition would be even more costly, he said. “One of the big advantages is the price of entry,” Mr. Bates said.
That cost will rise into the billions as Chevron invests the capital needed to create an oil sands operation that could be producing 100,000 barrels a day by the middle of the next decade. The company will be launching an in situ project — bitumen melted underground and then pumped to the surface — rather than mining oil-laden ore.
Chevron's decision to build rather than buy could mark the end of the era of acquisitions in the oil sands, one analyst said. “It's tough to buy something when no one wants to sell it,” said Mark Friesen, vice-president of institutional research at FirstEnergy Capital Corp.
Much of the investor interest in the oil sands comes from the simple fact that there are few other places in the world that have the capability, as Alberta does, to add a million barrels of daily production, said Michael Tims, chairman of Peters & Co. Ltd. Those that do either bar direct foreign investment, as is largely the case in Saudi Arabia, or are increasing pressure on foreign firms, as is Hugo Chavez's Venezuela.
Chevron already has a play in the oil sands through its 20-per-cent stake in the Athabasca Oil Sands Project. Shell Canada Ltd. owns 60 per cent of that project, while Western Oil Sands Ltd. owns the remaining 20 per cent.
Mr. Bates said Chevron plans to begin an exploration program in the next winter drilling season to delineate reservoirs, which will allow it to better define how much oil it will eventually be able to book as reserves, and then extract.
Mr. Friesen said many in situ projects recover between 30 per cent and 40 per cent of the original oil in place.
TheGlobeAndMail
The company said Thursday it has acquired rights to 73,000 hectares northwest of Fort McMurray — land that Chevron believes holds 7.5 billion barrels of oil.
The initial cost for Chevron is modest, between $50-million and $70-million to acquire two sections of leases. But turning that frozen muskeg into an industrial project will take years, and billions of dollars, said James Bates, vice-president of operations and asset development at Chevron Canada Ltd.
An acquisition would be even more costly, he said. “One of the big advantages is the price of entry,” Mr. Bates said.
That cost will rise into the billions as Chevron invests the capital needed to create an oil sands operation that could be producing 100,000 barrels a day by the middle of the next decade. The company will be launching an in situ project — bitumen melted underground and then pumped to the surface — rather than mining oil-laden ore.
Chevron's decision to build rather than buy could mark the end of the era of acquisitions in the oil sands, one analyst said. “It's tough to buy something when no one wants to sell it,” said Mark Friesen, vice-president of institutional research at FirstEnergy Capital Corp.
Much of the investor interest in the oil sands comes from the simple fact that there are few other places in the world that have the capability, as Alberta does, to add a million barrels of daily production, said Michael Tims, chairman of Peters & Co. Ltd. Those that do either bar direct foreign investment, as is largely the case in Saudi Arabia, or are increasing pressure on foreign firms, as is Hugo Chavez's Venezuela.
Chevron already has a play in the oil sands through its 20-per-cent stake in the Athabasca Oil Sands Project. Shell Canada Ltd. owns 60 per cent of that project, while Western Oil Sands Ltd. owns the remaining 20 per cent.
Mr. Bates said Chevron plans to begin an exploration program in the next winter drilling season to delineate reservoirs, which will allow it to better define how much oil it will eventually be able to book as reserves, and then extract.
Mr. Friesen said many in situ projects recover between 30 per cent and 40 per cent of the original oil in place.
TheGlobeAndMail
posted by Ottawa Gas Prices | 10:24 PM
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