Canada: FMC´s Overview Of Significant Developments In The Canadian Energy Industry - September, 2008

Last Updated: October 13 2008

Article by Doug Black, Q.C., Bill Gilliland, Alex MacWilliam, Karim Mahmud, Miles Pittman, Rich Miller, John Hurley, Cyrus Reporter, Jerry Farrell & Ron Stuber

Oil Sands News

The EnCana-ConocoPhillips venture has approved output expansions at the Foster Creek and Christina Lake oil sands projects in northern Alberta, parallel with the Wood River refinery project in the U.S. Bitumen output is planned to grow from the current rate of 70,000 bpd day to 180,000 bpd day by 2012 and 400,000 bpd by 2016. (See number 1 on map)

Devon Canada Corporation's Jackfish 2 oil sands project has received regulatory approval and construction is set to begin immediately. That announcement was made as Jackfish Phase 1 reached over 15,000 bpd of bitumen on its way to a 35,000-bpd target, which it is expected to reach in the first half of 2009. The in-service date of Jackfish 2 is planned for 2012 with a production rate of 35,000 bpd of bitumen. This $1 billion SAGD oil sands project is expected to recover 300 million bbls of oil during its lifetime. Since August 2007, Devon's Jackfish project has avoided using fresh groundwater in its in-situ recovery and is the only SAGD operation using saline, or brackish, water. (See number 1 on map)

Athabasca Oil Sands is planning two SAGD pilot projects. The application for its first project, consisting of 5 horizontal production wells and associated injection wells in Dover Central, was submitted in June. Drilling and first steam are planned for 2010 and production is expected to be 2,000 bpd of bitumen. The second application, for Thickwood, will be filed in October. Thickwood has a potential of reaching 150,000 bpd of bitumen production. Athabasca Oil Sands is one of the largest leaseholders in the Athabasca region, with a 100% working interest in more than 700,000 acres of land. (See number 1 on map)

As part of the conservative election campaign, Prime Minister Stephen Harper announced that it would look to ban the export of bitumen to countries that do not match Canadian efforts to cut emissions of greenhouse gases. Enbridge is proposing to build a the Gateway Pipeline which will allow bitumen to be shipped to the west coast and off to Asian markets. Although this announcement caught Enbridge by surprise, they are confident that this will not affect the development of the Gateway Pipeline as they are looking at a very broad market in Southeast Asia and California rather than a localized China market.

East Coast News

The Canada-Newfoundland and Labrador Offshore Petroleum Board has reported that Canadian producers were awarded most of the exploration licences in the Atlantic offshore this week. Together, the producers have agreed to spend a total of $186 million working the waters offshore Labrador over the next six years. Husky, Suncor and Chevron Canada were among the companies which placed successful bids.

West Coast News

British Columbia has raised an unprecedented sum in the fiscal year which began in April, due to the Horn River gas play in northeast B.C. $220-million was collected in September from its sale of oil and gas rights.

Canadian Arctic News

Chevron Canada Limited and BP Canada Energy have entered into a farmout agreement with MGM Energy to test four distinct play types in this winter's exploratory drilling program in the Mackenzie Delta. The wells are subject to partner and regulatory approval and will cost an estimated $74 million. MGM would like to spud its first well before the end of December and complete each of the four wells prior to the end of the winter drilling season in April 2009. (See number 2 on map)

Imperial Oil executives have recently become increasingly optimistic about the likelihood of the Mackenzie Gas Project due to increasing interest from the federal government over the last nine months. The project is a 1,220-kilometre natural gas pipeline that would run through the Mackenzie Valley in the Northwest Territories, connecting northern onshore gas fields with North American markets in the south. Imperial Oil's capital spending plan will range between $1.5 billion and $2 billion. Despite credit woes and dropping oil prices, the company does not foresee that it will have trouble accessing capital.

Alternative Energy News

Shell Canada has reported that its tree planting program with Tree Canada Foundation has reached one million trees. The aim of the program is to sequester over 650,000 tonnes of carbon dioxide. As part of the commitment Shell made in 2000, contributions have reached approximately $2 million in funding for the planting of around 100,000 trees annually across Canada to reduce or offset greenhouse gas emissions from its main oilsands operations.

On the Horizon

The Canadian Federal Election will be held October 14th. We'll update you on results in the next issue.

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