Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry (June 2005)

Last Updated: October 13 2005

Article by Doug Black, Q.C., Bill Gilliland, Nick Kangles, Alex MacWilliam, Miles Pittman, Francis Saville, Q.C. and Karim Mahmud

Alberta Oilsands News

Enbridge announced the first stage of an open season to secure commitments to its Southern Access Pipeline project. Upon completion of a $1.3 billion U.S. expansion, the project, which ships crude oil from Alberta’s oilsands to U.S. markets, will add 400,000 bpd of crude capacity to Enbridge’s mainline system. (See number 1 on map)

UTS Energy and Petro-Canada have closed their announced deal to spend $1 billion on the Fort Hills oilsands project. Petro-Canada has acquired a 60% interest in the project from UTS and will pay $900 million of the first $1 billion spent building the open-pit mine and upgrading refinery. The project is expected to cost between $4 billion and $5 billion, and to produce 100,000 bpd of bitumen by 2010. The two companies are currently in discussions with several mining companies in the hopes of obtaining a third partner for the project. (See number 2 on map)

Petro-Canada announced it will be selecting a location for a second steam-assisted oilsands facility within the next six months. Earlier this year, Petro-Canada announced that it intends to build a separate upgrader to handle the bitumen from the Fort Hills project. Both decisions are part of Petro-Canada’s plan to aggressively push its oilsands strategy forward. (See number 2 on map)

The Athabasca Oilsands Project, a joint venture among Shell (60%), Chevron (20%) and Western Oil Sands (20%), achieved its first 100 mbbl of bitumen production in just over two years of operation. The Athabasca Oil Sands Project has been in operation since April of 2003. (See number 2 on map)

North American Oil Sands and its joint venture partner, Paramount Resources, have begun a stakeholder consultation process in connection with their proposed thermal in situ project in the Athabasca region of northeast Alberta. The stakeholder consultation process will canvass aboriginal, community and business groups, as well as regulatory authorities, regarding a drilling and seismic program planned for next winter. The drilling and seismic program will be used to evaluate the resource size and quality to determine the size and timing of the project. (See number 2 on map)

West Coast News

Enbridge will conduct an open season for its Gateway Project’s condensate import pipeline, which would provide transportation for 150,000 bpd of offshore condensate supply from Canada’s West Coast to Edmonton, Alberta. The condensate import pipeline is a potential element of the project, which also involves a crude oil export pipeline to transport oil from Edmonton to the coast to service both U.S. West Coast markets and Asia-Pacific refiners. A separate open season for the export pipeline will be held later this year. The decision to proceed with one or both pipelines has not yet been finalized. (See number 3 on map)

Shell announced its strategy to grow its western Canadian natural gas business following a $85.6 million land purchase in northeast British Columbia. The 58,000 acre land acquisition doubles Shell’s land holdings in British Columbia’s deep basin area. The company is currently in the process of assembling a drilling plan for the area. (See number 4 on map) 

Harvest Energy has purchased 57,000 acres in northeast British Columbia containing 5,200 bpd of production for $240 million in net proceeds. Original oil in place reserves are estimated at 180 mbbl with cumulative recovery to date of 5.6%. (See number 4 on map)

Canadian Arctic News

The Geological Survey of Canada aims to produce a geological atlas of the Mackenzie Valley corridor to aid exploration and development in Canada’s Arctic. The project is motivated by renewed interest in Arctic petroleum reserves. The atlas will be a companion to the Geological Atlas of the Western Canadian Sedimentary Basin, and its GIS map will be linked to a database of proven or discovered resources as well as formalized table formation charts. (See number 5 on map)

Co-venturers in the Mackenzie Valley gas pipeline are working to clear the remaining impediments to the project’s development. Since the project was halted in May of 2005, the various stakeholders have been working to expedite resolution of the regulatory and land access issues. (See number 5 on map)

East Coast News

Irving Oil has reached an agreement with Repsol YPF to develop an LNG import and regasification terminal on Canada’s East Coast. The terminal is expected to commence operations in 2008 and will have initial capacity of 1 bcfpd. Irving will market the regasified product in Atlantic Canada while Repsol markets the rest of Canada and the United States and provides the natural gas to fuel the plant. (See number 6 on map)

Anadarko is proceeding with its $650 million Bear Head LNG facility in Cape Breton. Completion of the facility is expected in 2008, and Anadarko reports firm supply contracts with foreign natural gas suppliers are in advanced stages of finalization. Anadarko expects to award the engineering, construction, and procurement contract for the facility by this fall and is in talks to use most of the added capacity from the 1.5 bcfpd expansion of the Maritimes and Northeast Pipeline. Anadarko also expects to announce a reduced toll shipping deal with Maritimes and Northeast. Anadarko plans to import 1 bcfpd to the facility and may send up to 85% of that gas to the United States. (See number 7 on map)

Keltic Petrochemicals proposes to construct and operate a $4 billion petrochemical complex, LNG importation and vapourization facility and associated infrastructure in Goldboro, Nova Scotia. The complex will include petrochemical facilities, a marginal wharf, an LNG terminal, LNG storage and re-gasification facilities, an electrical co-generation facility and a highway to the development site. (See number 8 on map)

Husky Energy plans to drill three exploratory wells offshore of Newfoundland later this summer. Two wells will be drilled in the Jeanne d’Arc Basin, while the

third will be in the South Whale Basin. Husky is also planning to drill up to four wells in the Grand Banks area as early as June of 2006. Chevron expects to commence drilling in the Orphan Basin in late 2006 or 2007. The Orphan Basin has estimated reserves of 940 mmbl of oil. ConocoPhillips is targeting 2007 for drilling in the Laurentian Basin, which has estimated reserves of 600- 700 mmbl of oil and 8-9 tcf of natural gas. (See number 9 on map)

EnCana hopes to make a decision sometime this year regarding the future of its Deep Panuke natural gas project off the Nova Scotian coast. Shell and Talisman Energy are seen as likely candidates to acquire the project. (See number 10 on map)

Chevron, ExxonMobil, Petro-Canada and Norsk Hydro, co-owners of the Hebron/Ben Nevis oilfield offshore of Newfoundland, hope to decide whether to commence regulatory applications and front-end engineering and design by the end of this year. The cost to first oil production is expected to be between $3.2 billion and $5.2 billion. Hebron/Ben Nevis is estimated to contain 400- 700 mbbl of recoverable reserves. (See number 9 on map)

Schlumberger has completed the stimulation work on the Galt #3 well, located 20 kilometres west of Gaspe. It is expected that the Galt #3 well will become the first commercially productive oil well in Quebec’s history. (See number 11 on map)


• Sawn Lake oilsands project to begin drilling July 2005. 

In this article, all dollar amounts are Canadian dollars. We have also used the following abbreviations: bpd - barrels per day; mmcfpd - million cubic feet per day; bcfpd - billion cubic feet per day; tcf - trillion cubic feet; bbl - barrel; mbbl - million barrels; bbbl – billion barrels; boe - barrels of oil equivalent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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