Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry - September, 2005

Last Updated: October 17 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

Petro-Canada announced it has entered into an agreement with mining giant Teck Cominco that will see Teck acquire a 15% interest in the Fort Hills oil sands project. Teck will earn a 10% interest from Petro-Canada in return for funding $250 million worth of expenditures incurred by Petro-Canada and its project partner UTS Energy. In a separate agreement Teck will earn a 5% interest from UTS in return for funding $225 million of UTS expenditures. The overall ownership interest in the project will be 55% Petro-Canada, 30% UTS and 15% Teck. Located north of Fort McMurray, Alberta, the Fort Hills project has regulatory approvals to produce up to 190,000 bpd of bitumen. (See number 1 on map)

Nexen and OPTI plan to inject in excess of $10 billion into their Long Lake joint venture over the next decade to triple current production to 240,000 bpd by 2015. OPTI’s CEO suggested that the prospect of high oil prices for the foreseeable future have bolstered the case for expansion, though he noted the project would be profitable even if oil prices fall below $30 (US) a barrel. The Long Lake venture is an in-situ project located southwest of Fort McMurray, Alberta. (See number 1 on map)

Shell announced it is considering a multi-billion dollar project to develop oil sands leases it holds in the Peace River area in northwestern Alberta. Along with giants such as Suncor, Shell is already an established open-mining player in the Athabasca region near Fort McMurray. Although the Athabasca region boasts the largest oil sands deposits, other areas such as the Cold Lake and Peace River regions contain significant deposits. Presently, Shell is weighing the merits of a three-phase expansion, resulting in production of 30,000 bpd by 2009. (See number 2 on map)

Enbridge announced long-term shipping agreements in relation to its proposed Waupisoo pipeline. Agreements have been struck with Petro-Canada, Suncor, ConocoPhillips and Total E&P to transport crude oil from the oil sands to Enbridge’s Edmonton area refinery. The 30-inch diameter, 380-kilometer Waupisoo pipeline will bring Enbridge’s ultimate takeaway capacity from the oil sands to 1.2 mbpd. The pipeline is expected to be completed by mid-2008. (See number 1 on map)

West Coast News

Husky announced the completion of the first phase of its Clean Fuels Project. Husky’s Prince George refinery is now capable of producing low sulphur gasoline. Husky’s President & CEO noted that "[t]he low sulphur gasoline produced at the refinery meets the Government of Canada’s new fuel specifications and will also benefit the environment by reducing vehicle emissions in central and northern British Columbia." The project complements Husky’s ethanol infrastructure in Lloydminster, Saskatchewan. The Project began in July 2004 and was completed in August 2005. (See number 3 on map)

EnCana has entered into an agreement with Methanex whereby Methanex would provide EnCana with the use of its import terminal in Kitimat, British Columbia. The terminal would be used to transport condensate by rail to Alberta for use in EnCana’s oilsands operations. Condensate is used to dilute bitumen, which is too viscous to transport by pipeline. The announcement also validates Enbridge’s recent plans to build a condensate pipeline alongside the planned oil pipeline as part of its Gateway Project. (See number 4 on map)

Canadian Arctic News

The Mackenzie Valley Pipeline has a revised completion schedule of 2010 or 2011, however negotiations are still proceeding daily with First Nations groups. The proposed pipeline is the largest project of its kind in Canadian history. It will offer access to 9 tcf of proved and probable natural gas reserves already discovered in the Mackenzie Delta and will open up further exploration both on the Mackenzie River Delta, in the Beaufort Sea and through the Mackenzie Valley. (See number 5 on map)

Devon is spudding the first offshore well in the Beaufort Sea in 15 years. At the end of August, Devon positioned an offshore platform just off the western coast of Beluga Bay, north of the Mackenzie River Delta in the southern Beaufort Sea. Drilling of the well is set to begin in mid-December. If Devon sees positive results from this well, it will follow with three more offshore wells over the next three winter drilling seasons. Devon has invested $250 million in exploration since acquiring four offshore licences in 2000 and this well is being drilled at a cost of $58 million. In the Canadian Mackenzie Delta – Beaufort region, there is an estimated 67 tcf of recoverable gas and 7 bbbls of recoverable oil, discovered and undiscovered. The region accounts for about 20% and 25% respectively of the total gas and oil resources in Canada’s frontier basins. (See number 6 on map)

The Governor of Alaska stated recently that the State should invest about $4 billion USD in the Alaska gas pipeline, giving it a 20% stake in the project. According to the published reports, the State has proposed this investment to ConocoPhillips, BP and ExxonMobil, the major producers of petroleum in the Prudhoe Bay area, and hopes to have a contract finalized by the end of this year. An Alaska natural gas pipeline would transport gas from Alaska to Alberta and thereafter to markets in the lower 48 states. Depending on the project configuration, the pipeline is estimated at upwards of $20 billion USD. Prudhoe Bay and other North Slope oilfields contain 35 tcf of proven reserves. The pipeline would supply 10% of US gas needs and would have an operating life of 30 to 50 years. (See number 7 on map)

East Coast News

There is a great deal of commercial interest in two LNG terminals proposed for the St. Lawrence River region of Quebec. The Gros Cacouna terminal is being proposed by Petro-Canada and would be situated about 240 km northeast of Quebec City. The Rabaska project is being proposed by

Gaz Metro, Enbridge and Gaz de France and would be situated near the town of Levis, Quebec. The two proposed terminals would represent a combined capacity of 1 bcf per day. The Rabaska terminal would tie-in with the Trans-Quebec and Mountain Pipeline at St. Nicolas, Quebec after receiving LNG from tankers coming up the St. Lawrence River. Both Rabaska and Gros Cacouna are currently advancing, although neither has yet been approved by regulators. The two Quebec terminals would be in addition to the Irving Oil Canaport terminal near St. John, New Brunswick and Anadarko’s Bear Head terminal in Nova Scotia, both of which have already received regulatory approval. Collectively, all four facilities will be able to process up to two bcf of gas per day.


  • Suncor donating $3 million to help address shortage of skilled workers in Alberta.
  • Enbridge announces conclusion of Gateway condensate pipeline open season and increases planned diameter to 20 inches.

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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