EnCana spinoff plans new oil sands project
By Carrie Tait, Financial Post, with files from Reuters
October 1, 2009
CALGARY -- A year after dreary news blanked the oil sands thanks to a rapid-fire procession of project delays, EnCana Corp. Thursday said it plans to kick off the process to launch a new multi-billion project with a technological twist.
The recipe for the new project, called Narrows Lake, will be mostly steam-assisted gravity drainage with a dash of industrial solvent. Cenovus Energy Inc., which will be created as EnCana spins off its oil sands and refining business at the end of November, will use solvents like butane to help pump bitumen to the surface.
The solvent is intended to reduce greenhouse gas emissions because less steam is necessary to extract the tar-like substance, all while cranking up the amount of bitumen the company can recover.
Narrows Lake is being carved out of the company’s producing Christina Lake property. EnCana plans to file its first regulatory applications for the property in the middle of 2010, executives said on a conference call. The project will be the first to use solvents to recover bitumen on a commercial scale.
Further, EnCana’s leaders spoke confidently about the company’s expansion plans for its two bitumen-producing projects — Foster Creek and Christina Lake — as well as its blueprints for its 10 undeveloped sites.
“Our intention is to initiate expansion of an existing project or new development every one to two years,” Harbir Chhina, EnCana’s vice-president of upstream operations, said on a conference call.
That said, EnCana noted it will take longer than originally predicted to complete the expansions already planned at Foster Creek and Christina Lake. The target date has been pushed back to 2017 from 2015 as spending slowed in sync with the economic and commodity price downturns.
While costs have dropped from the oil sands’ heyday, the memories of sky-high expenses still loom over EnCana’s growth ambitions.
The oil and gas outfit argues its internal fabrication yard in Edmonton, for example, helps lower the amount of cash it will have to fork over to proceed with mega-projects.
“It would be fool-hearty to bet against them,” Martin Molyneaux, an analyst at FirstEnergy Capital Corp., said.
Narrows Lake could churn out between 80,000 and 100,000 barrels of bitumen per day, EnCana said.
John Brannan, the integrated oil division’s president, said the company has not estimated a cost for the overall project, which is likely to be developed in phases of 40,000 barrels a day.
Expansions of current EnCana oil sands projects have cost under US$20,000 per producing barrel of crude per day. But a stand-alone development such as Narrows Lake — which requires all new pipelines, processing equipment and roads — is expected to be pricier, Mr. Brannan said.
For example, at US$30,000 per barrel, the total cost of a 100,000-barrel-a-day project would be US$3-billion.
The company said it now expects its oil sands operations to produce 400,000 barrels a day by 2018, which is about two years later than forecasts it made before the economic crisis forced the industry to chop spending and delay projects.
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