Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry –July 2006

Last Updated: September 27 2006

Article by Doug Black, Bill Gilliland, Nick Kangles, Alex MacWilliam, Karim Mahmud, Miles Pittman, Rich Miller, John Hurley, Roxanna Benoit, Jerry Farrell & Ron Stuber

Alberta Oilsands News

ATCO Structures has received a contract for the first phase of a project to manufacture, supply and install accommodations for trades people and management personnel at Shell's Athabasca Oil Sands Project Upstream Expansion Number 1, north of Fort McMurray. The first phase of the project will accommodate 800 people and is expected to be completed in early 2007. The project will be capable of expansion to house 2,500 people. (see number 1 on map)

Korea National Oil Corp has purchased an oil sands lease near Coldlake, Alberta, from Newmont for $310 million, and is considering building an upgrader to process oil from the site. The Company plans to produce 30,000 to 35,000 bpd of oil for 20 years, with initial production expected around 2008 and full scale operations beginning in 2010. (see number 1 on map)

Koch Exploration Canada has made a significant portion of its Athabasca Oil Sands leases available for sale, containing an estimated 47 bbbls of oil in place. The offering represents an opportunity for companies to acquire a mostly 100% working interest in large oil sand lease blocks containing numerous large-scale SAGD and primary production opportunities. (see number 1 on map)

Synenco Energy has filed for regulatory approval for the construction and operation of its Northern Lights Mining and Extraction Project. Northern Lights consists of 2 parts, a mining and extraction project north of Fort McMurray, and an upgrader located north of Edmonton. The project will be developed in 2 phases, with each phase producing approximately 57,000 bpd of bitumen. Construction of the first phase is scheduled to start in 2008 with production beginning in 2010. Second phase production is expected by 2012, and output is expected to continue for at least 28 years. The current estimate of recoverable oil sands resource contained on the project lands is 1.08 bbbls. (see number 1 on map)

Enbridge has extended the open season for its proposed $920 million diluent pipeline from Chicago to Edmonton, as it has received commitments exceeding the 180,000 bpd capacity for its proposed Southern Lights Pipeline. The pipeline, which has a 2009 in-service date to coincide with proposed Southern Access heavy crude line, will involve a combination of new construction and utilization of the existing facilities. These changes will increase the light crude system capacity by approximately 45,000 bpd. The capacity of the Southern Lights Project, combined with the proposed 150,000 bpd Gateway condensate import pipeline, should meet the estimated demand of 300,000 bpd of diluent by early next decade.(see number 1 on map)

West Coast News

Enbridge has signed an agreement with the Yekooche First Nation as part of its consultation on its proposed Gateway Pipeline project from Edmonton to Kitimat, B.C. Under the recent memorandum of understanding, Enbridge will provide capacity funding to enable it to participate in the project. The memorandum also provides a framework for helping to identify potential opportunities for Yekooche involvement in the construction and operation of the pipeline. Before the end of the year, Enbridge plans to file with the National Energy Board its application for the 400,000 bpd crude oil export pipeline and a 150,000 bpd import condensate line from Kitimat to Edmonton.

Pacific Northern Gas and Kitimat LNG have formed Pacific Trail Pipeline Limited Partnership to develop a natural gas transmission pipeline system from Kitimat to Summit Lake, B.C. to serve the proposed LNG terminal near Kitimat. Kitimat LNG recently obtained the provincial environmental permit and certificate for the terminal and expects to receive federal permits shortly. The project will entail the construction of approximately 470 km of a 30 or 36 inch diameter pipeline and required compression facilities, at an estimated cost of approximately $1 billion. The project and terminal, the first of its kind to be located on the west coast of Canada, is expected to commence operations in late 2009. Upon completion of the KSL project, Pacific Northern Gas' existing main line system will be transferred to the partnership and integrated with the KSL project facilities. Transmission system capacity will be increased from approximately 115 mmcfpd per day to enable Pacific Trail Pipeline to accept delivery of up to 1 bcfpd of re-gasified LNG from the terminal.

Canadian Arctic

A revised schedule for public hearings on the proposed Mackenzie Valley natural gas pipeline has been released by the Joint Panel. The hearings will end in mid-April 2007 and the Joint Panel report will be due in August of that year. Construction of the $7.5 billion project will likely begin in 2008 with first gas shipping in 2012. (see number 5 on map)

East Coast News

Anadarko has agreed to sell Bear Head LNG Corp., its wholly-owned subsidiary that is developing an LNG receiving terminal at Point Tupper, Nova Scotia, for $125 million. Under the agreement with U.S. Venture Energy, a private equity firm, Anadarko will also receive an 18-month option to secure up to 350 mmcfpd of throughput capacity at competitive rates. The decision to sell is part of Anadarko's recent announcement that it plans to sell off its Anadarko Canada subsidiary. (see number 6 on map)

Husky has successfully increased its production from the White Rose oilfield, offshore Newfoundland, to 110,000 bpd oil. A sixth production well, scheduled to come on-stream at the end of 2006, is expected to further increase reservoir production capacity to 125,000 bpd of oil. (see number 7 on map)

A regulatory filing by the stakeholders of the Hibernia project, Canada's largest offshore oil development, indicates the project's economic life may be extended by approximately eight years because of a significant increase in recoverable oil estimates. The new estimates are expected to extend the project's lifetime into the 2023 - 2025 range. The current output of about 200,000 bpd of oil is constrained by the existing water injection and gas-handling capabilities of the project, however work is underway to assess potential opportunities for the bottlenecking of the Hibernia platform facilities. Stakeholders of the Hibernia Project include Exxon Mobil, Petro-Canada, Chevron, Murphy Oil, Norsk Hydro, and the Canadian Government. (see number 7 on map)

Alternative Energy News

Manitoba Hydro and the Nisichawayasihk Cree Nation have signed an agreement to develop the 200 megawatt Wuskwatim Generating Station. The project cost is estimated at $1 billion and will see the generating station built at Taskinigahp Falls, about 40 kilometres downstream of Nelson House. Construction time is estimated at six years. (see number 8 on map)

Suncor Energy Projects reports its new $120 million ethanol plant near Sarnia, Ontario is now in production. With an expected production volume of 200 million litres per year, the St. Clair ethanol plant is now the largest such facility in Canada. The primary feed stock for the plant is corn and the operation is expected to process 20 million bushels per year. Suncor has also commissioned a new $165 million, 76 megawatt wind project near Ripley, Ontario on the shores of Lake Huron. (see number 9 on map)

BC Hydro and Power Authority has awarded 38 contracts, for more than 7,000 gigawatt hours per year, to independent power producers in its 2006 Open Call for Power. The new projects are expected to be online by 2010 and will provide enough power to meet the needs of over 700,000 homes. The contracts represent long-term purchase agreements with an average term of 30 years and are expected to generate $3.6 billion in private sector investments.

On the Horizon

Shell may spend up to $12.8 billion to expand Athabasca oilsands project.


In this newsletter, 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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