Oil Sands News
Bitumen production has commenced from Statoil's Leismer steam‐assisted gravity drainage (SAGD) project in the Athabasca oilsands. 10,000 bpd have been approved by Alberta Environment for production in the first phase. Subject to further approval, production is expected to increase to 18,800 bpd in the next two years. The Alberta Energy Resources Conservation Board has approved both Leismer and the second phase of the project, Corner, for expansion to 40,000 bpd production.
Conditional approval has been granted to the 100,000 bpd of bitumen Joslyn North project, following findings that the project meets new tailings management requirements and is in the public interest. Each of the two 50,000 bpd phases of the mine is expected to support mining activities commencing in 2017 and continuing through 2037.
Syncrude Canada reported its second‐highest production on record in 2010. The Syncrude Joint Venture had average production of 316,000 bpd in the fourth quarter of 2010, second only to the 327,000 bpd in the last quarter of 2009. In the last two months of 2010, production averaged more than 350,000 bpd, which is the approximate productive capacity of the Syncrude facilities.
MEG Energy reported an average 27,744 bpd of bitumen production in the fourth quarter of 2010 at Christina Lake, exceeding the nominal design capacity of the facility by nearly 10%. The fourth quarter steam to oil ratio (SOR) similarly exceeded the design capacity of 2.8, reporting a SOR of 2.3, down from 4.9 for the same quarter a year previous. An independent estimate indicates proved bitumen reserves of 606 mmbbl as of December 31, 2010, with combined proved plus probable reserves at 1,919 mmbbl. Production volumes for 2011 are projected at 25,000 to 27,000 bpd, along with approximately $900 million in budgeted capital investment directed toward increasing bitumen production capacity to 260,000 bpd by 2020.
East Coast News
Construction at Encana's Deep Panuke natural gas project located offshore Nova Scotia continues. The first gas is expected to begin flowing late in the year, and the project is expected to produce 200 to 300 mmcf a day for at least a decade.
The majority the construction contracts for the Hebron project, offshore Newfoundland‐ Labrador, are expected to be awarded this year at the completion of the front‐ end engineering and design (FEED). The FEED will narrow the project's price tag, previously estimated at $4 ‐ $6 billion. Hebron production is expected to range from 120,000 to 175,000 bbl per day of oil. The project owners include ExxonMobil (36%), Chevron (26.7%), Suncor (22.7%) and Statoil (9.7%) as well as government‐owned Nalcor Energy (4.9%).
Independent studies conducted on New Brunswick's shale gas potential have estimated a potential 2.14 tcf of potential gas resource in the Hillsborough region of the Moncton sub‐basin. Contact Exploration, which has 5,500 acres under lease in the area announced in late 2010 that it had successfully drilled and completed two 100% working interest horizontal oil wells. Well results to date have "met or exceeded" expectations.
West Coast News
The joint venture between Canadian Spirit and Canbriam Energy BC Partnership has entered the production phase, joining Talisman as a producer of natural gas in the Montney formation in the Farrell Creek/Altares area. The initial capacity of the Farrell Creek gas plant is 10 mmcfpd, with a capacity up to 50 mmcfpd.
Progress Energy has advanced plans to develop six Montney pods each capable of sustaining 50 mmcfpd for a period of 10 years. Current production is 45,000 boe per day from five drilling rigs operating in British Columbia and three in Alberta. Progress has drilled 11 horizontal wells at its Town South development in Montney, each with 5 mmcfpd initial production and 20 bbls per mmcf of high value NGL production. The compression and dehydration facility at Town South currently handles 35 mmcfpd and has been expanded to provide 50 mmcfpd capacity. An additional four horizontal wells are expected to be drilled and operating in the fourth quarter of 2011.
NOVA Gas received approval from the National Energy Board to construct and operate its $307 million Horn River project, which will transport sweet natural gas to Alberta from British Columbia's Horn River Basin. The project will include NOVA's acquisition and operation of the Ekwan section, as well as the construction and operation of new pipeline and metering facilities on the Komie East Extension and the Cabin Section. The Cabin Section is projected to require capacity for 1.04 bcfpd production by 2025 in order to meet the growth demands of the Horn River project.
A joint review panel representing the National Energy Board (NEB) and Canadian Environmental Assessment Agency (CEAA) is reviewing Enbridge's application for the Gateway Pipeline project, and Pat Daniel, CEO & President of Enbridge, is confident that the Pipeline project will be constructed. One proposed pipeline will transport 525,000 bbls per day of crude oil from Bruderheim, Alberta to Kitimat, British Columbia, while the other will carry 193,0000 bbls per day of imported condensate from Kitimat to the Edmonton area. The project has strong commercial support from a consortium of Canadian producers and southeast Asia refiners.
Canadian Arctic News
Speculation suggests that the Canadian government's approval of the $16.2 billion Mackenzie pipeline is imminent now that the National Energy Board (NEB) has issued a favourable decision for the pipeline. The longenvisioned 12,000 km pipeline will carry up to 1.2 billion cubic feet of gas south along the Mackenzie River valley to Alberta's gas pipeline network, from three fields near the Beaufort Sea.
Alternative Energy News
In partnership with GE Energy Financial Services, Plutonic Power has purchased a 50MW portfolio from First Solar, located in Ontario, consisting of a 10MW project in Amherstburg and two 20MW projects in Belmont and Walpole. First Solar will continue to develop the projects, and the output will be sold under 20‐year purchase agreements with the Ontario Power Authority. Permitting for the projects is underway and expected to be completed in spring with construction to begin by midyear.
Pattern Energy has begun commercial operation of the first batch of turbines at its 138 MW St. Joseph project. The wind farm is the largest in Manitoba and consists of 60 2.3MW turbines supplied by Siemens. Work continues on the balance of the turbines, which are expected to be fully operational within a month. Pattern Energy has negotiated a 27‐year power purchase agreement with Manitoba Hydro, the province's main electric and gas distribution utility.
Marubeni, a major Japanese trading company, has entered the Ontario wind energy market with the acquisition of a 49% ownership stake in Invenergy's 78MW Raleigh Wind Energy Center, currently under construction. The next 20 years of output from the Raleigh project's 52 General Electric 1.5MW turbines is contracted to the Ontario Power Authority under the province's feed‐in tariff program. Commercial operation is expected to begin within weeks.
REpower has finalized the first contract within its 954MW framework agreement with Saint‐Laurent Energies Consortium, owned jointly by RES Canada and EDF Energies Nouvelles, and will deliver 150 turbines to the 300MW Lac Alfred project 400km northwest of Quebec City. The Lac Alfred project is being developed by the consortium and will be built in two phases, estimated to be completed by the end of 2012 and 2013, respectively.
On the Horizon
Oilsands capital spending is forecasted to reach $16 billion in 2011, representing an 18.5% increase over the almost $13.5 billion spent in 2010. The estimate includes a projected 30% spending increase by Suncor Energy up to $4.18 billion this year, as well as projected capital expenditures of $2.5 billion for Canadian Natural Resources and up to $1 billion for Cenovus Energy. Also included is the $332 million budgeted by Canadian Oilsands Trust to replace four of the five mining trains at Syncrude, which are expected to remain in operation for another 10‐20 years.
Talisman anticipates spending $450 million to $500 million in Western Canada in 2011 with the majority of spending evidencing a shift from dry natural gas into liquids‐rich gas and oil. Talisman intends to drill 35 net wells at its Farrell Creek Montney plan, and double the drilling rigs from four to eight. Talisman's Farrell Creek activity is likely to be driven in part by its strategic partnership with South Africa's Sasol. Under the deal, which is expected to close in the first half of 2011, Sasol will carry 75% of Talisman's future capital commitments in the area, and bring Sasol's gas‐to‐liquids expertise to Western Canada.
ABBREVIATIONS
In this newsletter, all dollar amounts are Canadian dollars unless otherwise stated. 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 ‐ thousand barrels; mmbbl ‐ million barrels; bbbl ‐ billion barrels; boe ‐ barrels of oil equivalent; MW – megawatts; kV – kilovolt; km – kilometre.
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