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article imageKorea-owned Harvest Operations to re-open oil sands project

By Karen Graham     Dec 22, 2017 in Business
In a surprising move, South Korea-owned Harvest Operations Corp. says it has decided to complete and begin producing from a 10,000-barrel-per-day BlackGold SAGD oil sands project near Conklin, Alberta that it halted in 2015.
According to a press release dated December 21, work was suspended at the site in 2015 when crude oil prices tanked. The Calgary-based arm of state-owned Korea National Oil Corp. says major work has already started at the BlackGold project site just south of Fort McMurray.
Harvest plans on commissioning its horizontal wells and commencing steam injection in the second quarter of 2018, followed by electric submersible pump conversion in the third quarter. CTV News Canada is calling the move a "rare sign of optimism" for the future of the oil sands, but it may be premature on their part.
The Blackgold Project called for 17 buildings including underground servicing and excavation  struct...
The Blackgold Project called for 17 buildings including underground servicing and excavation, structural concrete and foundation installation, crane installation and fire proofing of the structural steel.
Seko Construction
Blackgold Project
In March of 2008, the Blackgold project began with the initial application for approval to construct, operate and reclaim the oil sands to produce at a design capacity of 10,000 barrels per day of bitumen using steam assisted gravity drainage (SAGD) technology. Regulatory approval was obtained in 2010.
By 2012, 15 SAGD well pairs from two well pads were successfully drilled. Three years later, Blackgold was considered "mechanically complete" after Harvest had sunk $900 million into the project. However, in the spring of 2015, further work was put on hold and 30 workers were laid off. Benchmark oil prices were running US$50 per barrel, half as much as a year earlier.
Harvest now cites the stabilization of crude oil prices, along with being able to refinance $1.36 billion of maturing debt this year and raising an additional $250 million in financing last month as the reason for re-starting operations in the Alberta oil sands. The company is reviewing other opportunities to raise non-debt sources of finance, the proceeds of which will be used to fund its conventional business and pay down debt.
Harvest Operations Corp.
Oil-sands glut set to worsen as supply exceeds demand
According to a new report last week by Royal Bank of Canada, the oil sands glut is about to get much worse, and the headline alone, makes this writer wonder why anyone would want to start producing even more crude oil at this time.
The problem is with the extra-thick black oil that has been backing up for weeks in Alberta because of restricted flows on major pipelines that ship to refineries in the United States. There is some hope that some pressure may lift as short-term problems are resolved on the TransCanada Corp.'s Keystone pipeline and Enbridge Inc.'s mainline conduit
But even that is small potatoes compared to the projections for lower oil prices going into 2018, say the bank. "Oil sands producers are poised to pump another 315,000 barrels a day of supplies into the market next year, followed by 180,000 barrels a day in 2019. That follows the growth of 250,000 barrels per day this year," according to data compiled by the bank.
"Based on our analysis, Western Canada's oil exports are set to materially exceed export pipeline capacity in the first quarter of 2018," analysts led by Greg Pardy said in the report.
More about harvest operations corp, calgary Alberta, Blackgold oil sands project, Korea National Oil Corp, Crude oil prices
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