Canada: FMC’s Overview Of Significant Developments In The Canadian Energy Industry, September 2006

Last Updated: October 23 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 Oil Sands

AMEC has been awarded the program and project management contract for Enbridge's proposed Southern Access and Southern Lights oilsands pipeline projects to the United States. The contract will also cover engineering and procurement services for the Southern Access expansion, which involves expanding the crude oil pipeline to export additional supplies from the Alberta oilsands to refineries in the midwestern U.S. and beyond. The Southern Lights light hydrocarbon pipeline will transport 180,000 bpd of diluents from the Chicago area to northern Alberta. (please see number 1 on the map)

Looking for ways to more successfully market its oilsands production and increase price certainty, EnCana announced the possibility of building a western Canadian upgrader. A merchant upgrader near the oilsands would lessen its reliance on importing expensive condensate, reducing the volatility associated with stand-alone SAGD projects.

The Canada and Alberta governments have committed to spending $680 million to twin a highway to increase access to the province's oil sands. The Alberta government will spend $530 million toward doubling a stretch of Highway 63 to Fort McMurray, Alberta, with the federal government contributing a further $150 million.

Norway's Statoil is hoping to negotiate a deal worth more than $1 billion to earn an interest in the oil sands. Statoil is focusing its efforts on in situ projects that have not yet entered the regulatory approval phase. Statoil is not ruling out a multiple partnership, but would prefer a two-way split. (please see number 2 on the map)

West Coast News

Australia's LNG Limited and Kitimat LNG have agreed to terms whereby LNG Limited will supply 1.8 million tonnes of liquefied natural gas per year to Kitimat LNG's proposed regasification terminal in British Columbia. This announcement comes just months after Kitimat LNG received federal and provincial regulatory approval for the project. (please see number 3 on the map)

Canadian Arctic News

Source Petroleum has signed a letter of intent for an onshore exploration licence in the Mackenzie basin region of Canada's North West Territories. The 200,000 acre block is centred along the planned Mackenzie Valley Pipeline that will link the 1200 kilometres between the Beaufort Sea and northern Alberta. Source estimates the lands could hold up to 1 bbbls of oil and more than 1 tcf of gas. (please see number 4 on the map)

Despite Canadian Natural Resources' acquisition of Anadarko Canada for over $4 billion U.S., Anadarko Petroleum is still looking to sell off certain Canadian assets, including the company's Mackenzie Delta and other Canadian Arctic properties, which were not included in the sale of its Canadian subsidiary.

NOVA Gas Transmission is seeking regulatory approval to construct and operate two pipelines and one associated pipeline installation to connect its transmission system to the proposed Mackenzie Valley gas project. The project will cost $212 million, and construction of the facilities is proposed to begin in December 2010 and to be completed by April 2011, though the exact dates will depend on the construction schedule and in-service date for the Mackenzie Valley pipeline. (please see number 5 on the map)

East Coast News

Chevron Canada has commenced drilling an exploration well in the deepwater Orphan Basin, approximately 400 kilometres northeast of St. John's, Newfoundland. The well has an estimated cost of $140 million and will be drilled in water depths of 2400 metres and taken to a depth of 7,400 metres. This is the eighth exploration well drilled offshore Newfoundland so far this decade. If taken to its projected final depth, it will also be a Canadian offshore depth record. The Orphan Basin has been estimated to hold between 6 and 8 bbbls of producible oil. (please see number 6 on the map)

Alternative Energy News

The Alberta government has dedicated $200 million over the next three years towards research, advanced technology, market development and innovative projects focusing on energy supply and protecting the environment. To receive funding, projects must increase the efficiency and the effectiveness of energy exploration, extraction or development in Alberta and focus on energy, environmental research, technology and renewable or non-renewable energy resources, amongst others.

Manitoba Hydro will issue a request for proposals this winter for new wind projects totalling 300 megawatts that will provide power for more than 100,000 homes. Actual construction of new projects is to begin as early as 2007-2008. Three further allocations of 200 megawatts each are targeted for between 2013 and 2018 based on economic viability, and a total 1000 megawatt wind strategy is expected to generate $2 billion in investment.

Ontario Power Generation has formally started the federal approval process by filing with the Canadian Nuclear Safety Commission a site preparation license application for new units at its Darlington, Ontario facility. The filing is the latest development in Ontario's drive to increase nuclear power production. (please see number 7 on the map)

The Province of Alberta and EPCOR Utilities have announced that they will allocate $11 million towards an engineering design study for the construction of Canada's first "clean coal" project, which would be designed to capture carbon dioxide for enhanced oil recovery. Alberta's share will come from the newly created $200 million Energy Innovation Fund. It has been estimated the integrated coal gasification and CO2 capture facility could cost $1.5 billion and produce 400 megawatts of power, enough to provide electricity for a city of approximately 70,000 people.

Husky Energy has announced the official opening for its Lloydminster, Saskatchewan ethanol plant. Husky describes its facility as the largest plant of its kind in Western Canada, and it will produce 130 million litres of ethanol and 134,000 tonnes of distillers dried grain with solubles, a high-protein feed supplement, annually at peak outputs. The company expects to purchase 350,000 tonnes of wheat annually from local producers to manufacture the ethanol. (please see number 8 on the map)

On The Horizon

EnCana is expected to announce a multi-billion dollar deal with a major U.S. refinery to swap an interest in its oil sands properties for an interest in a Chicago-area refinery.

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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