The moves, by Imperial Oil Ltd and Tech Resources Ltd, runs counter to what has been happening in the Alberta oilpatch of late. Earlier this year, there was an exodus of companies such as ConocoPhillips, who divested of oil sand assets.
More recently, a number of oil sands rivals, including Canadian Natural Resources Ltd., Cenovus Energy Inc., and MEG Energy Corp. announce production cuts to avoid the steep discounts being applied to bitumen.
On Tuesday, Calgary-based Imperial, which is majority-owned by Exxon Mobil Corp. said it was committed to going forward with its $2.6 billion Aspen oil sands project in northern Alberta even as Canadian heavy crude is selling at the lowest prices in at least a decade.
Imperial’s announcement comes just a week after it received approval from the Alberta government to proceed. Construction is expected to start this quarter and should be completed by the start of 2022, according to the Financial Post.
Imperial plans to focus on wells rather than open pits and use solvents and steam to unlock 75,000 bpd, applying new technology to reduce emissions and water use while making extraction more economical. The Aspen project will be the largest new oil sands project to proceed since global crude prices collapsed in 2014.
Imperial claims it will be using “new technology that could reduce greenhouse gas emissions intensity and water use by as much as 25 percent versus traditional steam-assisted technology.” The technology injects solvents, along with steam into horizontal wells to melt the bitumen. The technology has been tested in a seven-year pilot project, reports CBC Canada.
Imperial earns $749 million in the third quarter of 2018 View our full Q3 2018 results here: $IMO pic.twitter.com/H7oRHHV3Am
— Imperial Oil (@ImperialOil) November 2, 2018
“We try not to get too excited when times are good and try not to get too depressed when times are bad,” Chief Executive Officer Rich Kruger said at Imperial’s investor day in Toronto on Wednesday. “When’s the best time to build things? When no one else is building, because you get the highest quality trades and contractors.”
Teck Resources project for oilpatch
Teck began the regulatory hearing process in September for Frontier, an open-pit mine that would produce 170,000 bpd in its first phase, starting in 2026. Tech also claims the new project would rank among the lowest greenhouse gas emitting projects in the oil sands because of the new technology that will be used.
“While we know that use of alternative energy will increase, we also know that oil will remain an important part of the world energy mix,” Teck spokesman Chris Stannell said. “The long-term outlook for the global oil market is favorable for a project such as Frontier.”
Unlike many of the pipeline projects, Imperial and Teck have the approval of aboriginal peoples living nearby. Mikisew Cree First Nation conditionally supports Teck’s Frontier project and hopes to buy a stake, said Melody Lepine, the band’s director. This should reassure shareholders, Lepine said. “Teck and Imperial can go back to their investors and say, ‘look we have these agreements with indigenous communities.’”
Wise business decision – or not?
As Digital Journal noted last week, “any new oil sands projects are becoming less certain. The heavy oil in the Alberta oilpatch is expensive to get out of the ground and with the continuing shortage of pipelines, many big names are pulling out of the oil sands and looking to greener pastures.”
Yes, there is a very real shortage of pipelines that has created a glut of oil in the oil sands, and the price of oil is still very precarious. Enbridge Inc.’s Line 3 replacement oil pipeline project is expected to be in service in late 2019, and many are still hopeful that TransCanada Corp.’s Keystone XL pipeline and the federal government’s Trans Mountain pipeline expansion will get completed sometime in the next few years.
