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Conoco spends to prep for oil sands crude

Thursday, November 30, 2006
BILLINGS, MONT. — ConocoPhillips is preparing to spend hundreds of millions of dollars to retrofit its refinery in Billings to process crude oil from the oil sands of northern Alberta, the company's board chairman and CEO says.

Jim Mulva told the Billings Gazette in a story Thursday that the company is evaluating different technologies to handle the heavier, dirtier crude, and that the company's board is expected to vote on the project early next year.

“We are studying both an expansion and a capability improvement at the Billings refinery,” Mr. Mulva said. “That means our ability to handle tougher crudes, worse-quality crudes.”

Mr. Mulva declined to discuss details of the project, except to say it is part of the company's 2007-08 overall business plan. The multi-year construction project would be significantly larger than the low-sulphur diesel conversion completed this year in Billings, whose cost has not been revealed.

Billings Refinery manager Michael Wirkowski said the heavy-crude project would “add to the value of the contribution we make to Billings and the state of Montana in providing high-quality petroleum products.”

ConocoPhillips announced in October it had agreed to a joint venture with Calgary-based oil and gas giant EnCana Corp. that will give the Houston company a strong foothold in the highly coveted oil sands.

Under the deal, ConocoPhillips said it is getting a 50 per cent interest in EnCana's Foster Creek and Christina Lake projects, both located in northeast Alberta.

The oil sands at those two locations hold estimated recoverable bitumen, a thick oil, of more than 6.5 billion barrels.

If the Billings refinery is retrofitted to handle more of the heavy, high-sulphur and acidic Canadian crude, the product wouldn't necessarily come from those fields, EnCana spokesman Alan Boras said. ConocoPhillips would buy the most economical product.

“They (apparently) are retrofitting the refinery to match market supply coming now and coming in the future,” Boras said.

During an energy forum Tuesday in Billings, Mr. Mulva said companies are scrambling to find enough oil to keep up their current reserves, much less to meet future worldwide demand that could triple to 220 million barrels a day by 2030.

Meeting that demand would cost $4.3-trillion (U.S.), by some estimates, Mr. Mulva said.

The easier-to-refine and cheaper light crude is becoming more scarce. That's one reason ConocoPhillips is moving toward the other half of the world's supply — heavy oil.

“We're having to go deeper, use more technology. It's more expensive, but we're finding lower-quality oil,” Mr. Mulva said. “It's going to be the product of the future.”

ExxonMobil's Billings refinery invested four or five years ago in the hardware to process heavy-sour crudes, including those from Canadian oil sands, according to public affairs spokesman Dale Getz.

However, how much heavy crude is being run through ExxonMobil's process is proprietary data.