Petro-Canada and Partners Moving Ahead with C$26.2 Billion Oil Sands Project
28 June 2007
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| The Fort Hills project area, also showing pipeline and upgrader locations. Click to enlarge. |
Petro-Canada and its partners announced the formal design basis for the Fort Hills Project (FHP)—an integrated oil sands mining project that includes a mine and bitumen extraction plant 90 kilometers north of Fort McMurray, Alberta and an upgrader in Sturgeon County northeast of Edmonton, Alberta.
The Fort Hills Project is expected to produce up to a total of 280,000 bpd of synthetic crude oil by 2015, once all phases are complete. The FHP partners currently project the capital cost of FHP to be C$26.2 billion (US$24.7 billion), and full cost exposure to be C$33.4 billion (US$31.5 billion).
The announcement of the formal design basis marks the partners’s commitment to proceed with the front-end engineering and design (FEED) stage. The FEED process will take about 12 months to complete, producing a definitive cost estimate and the basis upon which the final go-ahead decision on the project will be made.
The first phase of the project is planned to produce 140,000 barrels per day (bpd) of synthetic crude oil (SCO). Associated bitumen production is expected to be about 160,000 bpd. First bitumen production is expected to begin in the fourth quarter of 2011 with first synthetic crude oil production from the Sturgeon Upgrader anticipated in the second quarter of 2012.
The preliminary capital cost estimate for the mine and upgrading components of the first phase of Fort Hills is C$14.1 billion. The FEED project carries a cost of C$1.1 billion. That works out to a capital intensity of about C$108,000 per design barrel of SCO for Phase I. Phase II will double the capacity of Phase I.
Fort Hills Energy L.P. consists of Petro-Canada with a 55% working interest, UTS Energy Corporation with a 30% working interest and Teck Cominco Limited with a 15% working interest, with Petro-Canada Oil Sands Inc., a wholly owned subsidiary of Petro-Canada, as the contract operator for the project.
The Fort Hills mine received regulatory approval in 2002 from Alberta Environment and the Alberta Energy and Utilities Board. The Fort Hills partnership filed the commercial application and environmental impact assessment for the Sturgeon Upgrader with provincial regulators in December 2006.
Petro-Canada is one of Canada’s largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally. UTS Energy Corporation is focused on growing and developing oil sands assets, with a market capitalization of approximately C$2.5 billion. Teck Cominco Limited is a diversified mining company, headquartered in Vancouver, Canada.
Resources:
Moving Forward in Oil Sands. Fort Hills...the Next Big Step (Petro-Canada)
Fort Hills Reports & Regulatory Filings
Let's play the zero sum oil sands game again. Massive local environmental destruction, big climate change impact, no potential to scale up to meet challenge of peak oil. But hey there's some big profits to be made, money rolling into Treasury coffers and the mighty US energy wastage beast has to be fed.
Posted by: critta | 28 June 2007 at 04:15 PM
I wonder how far 25 billion dollars would go getting a substantial fleet of PHEVs and BEVs on the road that would save the 280 000 bpd that this boondoggle would produce?
At least the residents of Fort Hills would have their environment preserved.
Posted by: Ender | 28 June 2007 at 05:58 PM
Ender:
You have a very good point. Half that money could most probably reduce oil consumption (and pollution) by twice as much every year.
Unfortunately, our (south of the border) neighbours, and many of us, (north of the USA border) have to keep driving our pick-ups and 4 x 4 (2 1/2 T +) gas guzzlers to go to the corner store and drive the kids around etc.
As long as we have this attitude problem, more $$ billions will be spent on polluting tar sands projects. Each $ spent on those project eventually produce as much as one Tonne + of CO2 thoughout the carbon chain.
Another negative effect will be the over usage of the remaining fresh water at the rate of 4 to 5 barrel of fresh water per oil barrel extracted.
What an ecological super-mess for a short $$ term gain.
A few million PHEVs and BEVs may be the best way to slow it down. Are we ready for it?
Posted by: | 28 June 2007 at 07:58 PM
If 25 billion were invested into buying pure electric cars at 30,000 a piece that would be 833,333 cars. And I only want one.
Posted by: Domenick | 29 June 2007 at 06:45 AM
From what I understand, oil sands mining is an environmental nightmare, and bashing America is very much in vogue. But I see it as a Canadian problem. If they don't mine it, then we won't buy it. It's as simple as that.
America isn't the only nation with environmental blood on their hands, oil sands mining in Canada being just one case in point.
Thru private industry, government labs, and the Department of Energy spending tens of millions of dollars on energy research, we will get the job done. What has Canada done lately?
Posted by: shigley | 29 June 2007 at 07:19 AM
Not much. We have a Prime Minister that didn't know that green was a colour until this year. His primary support base is in Alberta and I can't imagine them wanting to give up all the royalties. I also think it likely that if we did try to curtail oil sands development, we'd come under considerable pressure from the US government to ramp it up.
Posted by: NeilPackrat | 29 June 2007 at 08:13 AM
The price of the vehicle is the wrong measuring stick; you should consider the difference in the price of a PHEV/BEV vs. a conventional car.
Figure the cost premium of a PHEV built from the factory at $7500 (mfgr's can build things more cheaply than they can be retrofit), and $25 billion would pay the premium for about 3.3 million PHEV's. If they boosted the fuel economy from 27.5 MPG average to 100 MPG average, the 15000 mi/yr driver would save 395 gallons/year. This would come to about 1.3 billion gallons/year or about 85,000 barrels/day. At $100/barrel for finished gasoline, it would save about $3.1 billion/year.
Looks like this measure would pay for itself in about 8 years, and that's assuming that oil prices wouldn't change. Given that oil prices would be lower under the PHEV scenario than the BAU scenario, the payoff would probably be faster.
Posted by: Engineer-Poet | 29 June 2007 at 08:16 AM
And maybe instead of burning all that natural gas, the phevs could run on natural gas. It just seems like such a waste.
Posted by: Derek | 29 June 2007 at 11:14 AM
Engineer-Poet:
If you include the value of CO2 reduction, i.e about 5 Tonnes per vehicle per year @ $50/T = another $1.75 billion/year, recovery time could be reduce to about 5 years.
Posted by: | 01 July 2007 at 07:16 PM