BP is moving into the Canadian oil sands by acquiring a half-share in the Sunrise field, located in the Athabasca oil sands in northeast Alberta, operated by Husky Energy. At the same time Husky will acquire a half share in BP’s Toledo oil refinery in Ohio, US, between them forming an integrated North American oil sands business. Two independent 50/50 joint ventures will be formed from the equally valued assets to own and develop the businesses.
The Sunrise oil sands field is expected to be sanctioned in 2008 with first production of bitumen in 2012, building to 200,000 barrels of oil a day (bpd) by the end of the next decade with a 40-year production plateau.
The field has been fully delineated by the drilling of 650 appraisal wells. Front End Engineering is well advanced on Sunrise with completion expected in early 2008. Joint investment up to 2012 is estimated at around US$3 billion. Site preparation work, including clearing of the various development areas and the rough grading of the central plant site, field facility roads and well pads is ongoing. The partnership will be responsible for sourcing fuel gas and diluents for Sunrise; and delivering product to a market transfer point at Hardisty where each party will take their respective production share.
SAGD is a thermal in-situ recovery process using pairs of horizontal wells. A horizontal production well is located near the bottom of the reservoir and steam is injected into a second horizontal well placed above it heating the bitumen and enabling it to flow. The bitumen and condensed steam, under the influence of gravity, drain to the lower horizontal well and are produced through the wellbore to the surface.
The bitumen will be piped to Hardisty, Alberta, from where it will be transported via existing pipeline networks for refining. Sunrise will be operated by Husky as a Canadian oil sands partnership, based in Calgary.
Toledo Refinery is located in the city of Oregon in northwest Ohio and has a crude distillation capacity is currently 155,000 bpd of which 60,000 bpd capacity is currently heavy oil. The refinery is located in one of the largest energy consumption regions of the US and, subject to necessary approvals and permits, will be expanded to process approximately 170,000 bpd of heavy oil and bitumen by 2015. It will be operated by BP as a US refining LLC. Joint investment of around US$2.5 billion is expected up to 2015 to sustain and reposition the refinery to process increased amounts of heavy crude oil and bitumen.
The refinery is well positioned to receive Canadian crudes for refining and supply into the US mid-west and the neighboring Canadian markets. It is a heavy sour coking refinery and is highly flexible (Nelson complexity index of 11.6), one of the few complex refineries outside the Gulf Coast region and California. It can take heavy and medium sour crudes and upgrade them to advanced, cleaner transport and heating fuels such as low sulphur gasoline, ultra low sulphur diesel, aviation fuels, propane, kerosene and asphalt. It produces daily 3.8 million US gallons of gasoline, 1.1 million gallons of diesel, 756,000 gallons of jet fuels—about 0.5% of US total refining capacity. The value of Toledo in the books of BP Products North America Inc. as at 30 September 2007 was US$494 million.
Toledo and Sunrise are excellent assets. BP’s move into oil sands is an opportunity to build a strategic, material position and the huge potential of Sunrise is the ideal entry point for BP into Canadian oil sands. In addition this deal will help guarantee a supply of advanced transportation fuels to major North American markets from Toledo which is a flexible and advantaged site.—Tony Hayward, BP group chief executive
Full regulatory approval of the proposed deal and final commercial agreements are expected to be completed in 1Q 2008, with a partnership effective date of 1 January, 2008.