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Rising costs no brake on oilsands; Industry pushing ahead on massive projects 17 Jan 2008
By: Gordon Jaremko The Edmonton Journal CALGARY
International industry giants vowed Wednesday to make strides in the oilsands and not let rising expenses or provincial royalties trip up aggressive development plans.
In their first public appearances since Premier Ed Stelmach hiked royalties last fall, France`s Total, Norway`s Statoil and U.S.-based Marathon Oil said their Fort McMurray bitumen-belt projects are continuing without pause.
Total E&P Canada will spend $10 billion to $15 billion on new mines and an Edmonton-area upgrader, and expects to have more than 1,500 employees producing 250,000 barrels a day by about 2015, company president Michael Borrell said.
StatoilHydro Canada Ltd. plans to hit 200,000 barrels of bitumen a day, made into premium synthetic oil at a five-square-kilometre Fort Saskatchewan upgrader by 2020, Norwegian chief executive officer Geir Jossang told an oilsands conference held by Insight Information.
Construction has begun in Detroit on a $1.9-billion refinery conversion to handle bitumen, Marathon vice-president Gary Heminger said.
By 2020, the firm plans to more than quadruple production acquired in a $6.2-billion takeover of Western
Oil Sands last year to 130,000 barrels daily.
Alberta`s oilsands are still among the world`s most expensive supply sources, but cost increases have not been out of step with international trends, Borrell said in an interview.
Total expects the Energy Resources Conservation Board to call public hearings on its plans for the first half of this year, and seeks approval in time for a final decision on construction in 2009, he said. Project costs and schedules will be reviewed as detailed engineering is completed and regulatory approvals are received, the French and Norwegian companies said.
The giant scale of Alberta resources and their location next to the U.S. as the world`s thirstiest oil market are the powerful forces driving oilsands development. Issues raised by royalties and taxes amount to "tweaking numbers" by comparison, Heminger said.
Marathon is working to persuade the province to modify demands for job- and revenue-creating resource processing and accept its plans for growing raw bitumen exports to upgrader plants south of the border, he added.
"We have a refining solution," he told reporters.
A bitumen upgrader can be added to an established U.S. refinery for as little as a third of the cost of building a new Alberta plant, Heminger said.
Unrestricted traffic in bitumen will boost prices and royalties from Alberta production by eliminating gluts that have led to discounts as deep as 50 per cent off benchmark international oil grades, he predicted.
Total and StatoilHydro, meanwhile, are preparing for carbon taxes or other restrictions on greenhouse gas emissions by incorporating reduction plans into engineering designs for their plants, Borrell and Jossang said.
Carbon-dioxide collection and storage equipment will be built when federal and provincial environmental policies make it practical and worthwhile, the executives said.
"This is something we cannot do alone," Jossang said.
Borrell indicated Total agrees, and has joined an industry consortium proposing to build, with government help, a pipeline network for carbon-dioxide collection and disposal from all plants.
"Any reasonable outlook still sees very substantial growth in this industry," said Strategy West president Bob Dunbar, a veteran of more than 40 years in oilsands work with companies and the provincial government.
Dunbar`s firm currently predicts oilsands spending averaging $13 bil-lion a year through 2020, which would roughly triple total bitumen production to nearly four million barrels a day.
Upgrading of about two-thirds of the output into premium synthetic oil is expected to be done at Alberta plants.
Oilsands production would be six million barrels a day -- six times its current level -- with average spending of $23 billion a year if all known projects are built on schedule, Dunbar said.
But rising costs and shortages of materials and workers will keep the pace more reasonable, he said.
"There`s no indication yet these costs have started to plateau," he said, citing cases of plant-construction costs tripling to more than $100,000 barrels a day of production capacity.
For the newest, costliest projects to be profitable, oil needs to be priced at $60 to $70 a barrel, Dunbar said.
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By: Gordon Jaremko The Edmonton Journal CALGARY
International industry giants vowed Wednesday to make strides in the oilsands and not let rising expenses or provincial royalties trip up aggressive development plans.
In their first public appearances since Premier Ed Stelmach hiked royalties last fall, France`s Total, Norway`s Statoil and U.S.-based Marathon Oil said their Fort McMurray bitumen-belt projects are continuing without pause.
Total E&P Canada will spend $10 billion to $15 billion on new mines and an Edmonton-area upgrader, and expects to have more than 1,500 employees producing 250,000 barrels a day by about 2015, company president Michael Borrell said.
StatoilHydro Canada Ltd. plans to hit 200,000 barrels of bitumen a day, made into premium synthetic oil at a five-square-kilometre Fort Saskatchewan upgrader by 2020, Norwegian chief executive officer Geir Jossang told an oilsands conference held by Insight Information.
Construction has begun in Detroit on a $1.9-billion refinery conversion to handle bitumen, Marathon vice-president Gary Heminger said.
By 2020, the firm plans to more than quadruple production acquired in a $6.2-billion takeover of Western
Oil Sands last year to 130,000 barrels daily.
Alberta`s oilsands are still among the world`s most expensive supply sources, but cost increases have not been out of step with international trends, Borrell said in an interview.
Total expects the Energy Resources Conservation Board to call public hearings on its plans for the first half of this year, and seeks approval in time for a final decision on construction in 2009, he said. Project costs and schedules will be reviewed as detailed engineering is completed and regulatory approvals are received, the French and Norwegian companies said.
The giant scale of Alberta resources and their location next to the U.S. as the world`s thirstiest oil market are the powerful forces driving oilsands development. Issues raised by royalties and taxes amount to "tweaking numbers" by comparison, Heminger said.
Marathon is working to persuade the province to modify demands for job- and revenue-creating resource processing and accept its plans for growing raw bitumen exports to upgrader plants south of the border, he added.
"We have a refining solution," he told reporters.
A bitumen upgrader can be added to an established U.S. refinery for as little as a third of the cost of building a new Alberta plant, Heminger said.
Unrestricted traffic in bitumen will boost prices and royalties from Alberta production by eliminating gluts that have led to discounts as deep as 50 per cent off benchmark international oil grades, he predicted.
Total and StatoilHydro, meanwhile, are preparing for carbon taxes or other restrictions on greenhouse gas emissions by incorporating reduction plans into engineering designs for their plants, Borrell and Jossang said.
Carbon-dioxide collection and storage equipment will be built when federal and provincial environmental policies make it practical and worthwhile, the executives said.
"This is something we cannot do alone," Jossang said.
Borrell indicated Total agrees, and has joined an industry consortium proposing to build, with government help, a pipeline network for carbon-dioxide collection and disposal from all plants.
"Any reasonable outlook still sees very substantial growth in this industry," said Strategy West president Bob Dunbar, a veteran of more than 40 years in oilsands work with companies and the provincial government.
Dunbar`s firm currently predicts oilsands spending averaging $13 bil-lion a year through 2020, which would roughly triple total bitumen production to nearly four million barrels a day.
Upgrading of about two-thirds of the output into premium synthetic oil is expected to be done at Alberta plants.
Oilsands production would be six million barrels a day -- six times its current level -- with average spending of $23 billion a year if all known projects are built on schedule, Dunbar said.
But rising costs and shortages of materials and workers will keep the pace more reasonable, he said.
"There`s no indication yet these costs have started to plateau," he said, citing cases of plant-construction costs tripling to more than $100,000 barrels a day of production capacity.
For the newest, costliest projects to be profitable, oil needs to be priced at $60 to $70 a barrel, Dunbar said.
[email protected]