Statoil forges ahead in Alberta oilsands
Engineering studies now underway
Ashok Dutta
Calgary Herald
Friday, September 07, 2007
Norway's Statoil will carry out three stages of front-end loading (FEL) studies for its proposed 200,000-barrel-per-day oilsands upgrader to be built at Fort Saskatchewan, as part of efforts to handle rising capital costs and get a better estimate on required investment levels.
FEL is defined as basic engineering to determine the various elements of a project or a processing plant.
"We are at the tail end of FEL-2," Geir Jossang, president and chief executive of Calgary-based North American Oil Sands Corp., said on Thursday. "The next stage will be to complete FEL-3, before preparing a basic design to serve as the basis to move forward."
He did not commit to any timeline for completing the various stages of engineering studies, stating that it was still early stages.
NAOSC is 100 per cent owned by Statoil and is the owner and operator of 1,110 square kilometres of oilsands leases in the Athabasca region, estimated to contain recoverable resources of 2.2 billion barrels. The portfolio is expected to yield more than 200,000 bpd of synthetic crude oil at the end of the next decade through construction of an upgrader.
"At present, we are producing globally 1.2 million barrels per day of oil equivalent," said Statoil's president and chief executive, Helge Lund. "Of this, the Norwegian continental shelf accounts for one million barrels and the remaining volume is from outside of Norway. Looking ahead, we want to maintain output levels until 2015. The aim will be to increase production elsewhere and our entry into Alberta's oilsands has to be viewed in that context."
In August, NAOSC said it had received approval from the Alberta Energy and Utilities Board for its Leismer demonstration plant in northern Alberta. First production is planned for late 2009/early 2010. The steam-assisted gravity drainage project calls for bitumen production from 22 horizontal well pairs linked to four well pads. Site preparation is already underway for the Leismer plant.
"We are at the very beginning of the project and our first goal will be to produce 10,000 bpd," Lund reiterated.
"Rising costs is not specific to Calgary, but is today an industry-wide issue. However, there are valid reasons for Statoil to invest in Calgary."
According to Lund, the lure of long-term barrels, political stability and access to the world's largest oil consumer have been major deciding factors.
"We also wish to strengthen our heavy oil portfolio," he said, adding that Statoil already has a 10 per cent stake in the Sincor extra heavy oil project in Venezuela. The $4.2-billion project, which is a joint venture between France's Total and Caracas-based PDVSA, is designed to produce about 200,000 bpd of heavy oil.
In late August, Statoil also announced that it was awarded 36 leases in the Alaminos Canyon and Keathley Canyon in the Gulf of Mexico.
"Globally, there is a shift towards the development of heavy oil resources," commented Paul Horsnell of London-based Barclays Capital. "Even conventional giants like Saudi Aramco, which is still home to the world's largest reserves of light oil, has embarked on the 900,000-bpd offshore Manifa field."
Lund believes that there is logic for international and state-owned oil companies to look into "unconventional resources" to meet the growing global energy demand.
"Oil output from OECD (Organization for Economic Cooperation and Development) nations are expected to peak around 2105 and the world will depend increasingly on a few nations . . . Russia, Middle East and Canada," he said, adding "The way to make up for it would be to access tight gas and oilsands resources."
Admitting the offshore sector is also receiving a fair share of attraction, he pointed out that Statoil's expertise in handling complex subsea pipelines, production platforms and related structures will come in handy for its future operations.
"We think Statoil will have an edge, but a lot needs to be done further to develop new technology," Lund said.
Colin Lothian, Middle East senior analyst with Edinburgh-based Wood Mackenzie, said two significant challenges for oil companies looking for oil offshore are rising costs of operation and the availability of rigs.
"Reservoirs to depths of 3,500 metres and more are being targeted now by the industry," he said.
Offshore Canada will also be a target area for Statoil, which is bracing itself for a merger on Oct. 1 with the oil and gas assets of fellow Norwegian producer Norsk Hydro.
"We view the fields as a good portfolio of assets," said Lund.
Norsk Hydro is a stakeholder in the Hibernia, Hebron and Terra Nova fields in offshore Newfoundland. Shares of Statoil closed at $30.67 US Thursday in New York, up one per cent.
adutta@theherald.canwest.com
© The Calgary Herald 2007
