Based on preliminary scoping and design work being done by Syncrude and ExxonMobil, Syncrude’s view now is that the existing Mildred Lake upgrading facility has latent capacity that can be unlocked through a series of debottleneck projects. These debottleneck projects involve accessing the excess coking capacity that was constructed during Syncrude’s last expansion, making modifications to other facilities, and potentially adding new ancillary units.

The expanded upgrader capacity would be supplied by bitumen from the undeveloped Aurora South mine. In December 2009, Syncrude submitted an update report to the regulators further to the conditions for approval received for Aurora South in 1998. Syncrude plans to begin constructing a mining train on Aurora South around 2012 with production expected by the end of 2016.

Construction on a second mining train is planned to begin around 2014 with production commencing towards the end of the decade. Each mine train is designed for capacity of about 100,000 barrels of bitumen per day, resulting in total bitumen productive capacity of 600,000 barrels per day by 2020 at Syncrude.

This volume will exceed the upgrader’s expanded processing capacity, resulting in roughly 115,000 barrels of excess bitumen supply. In November 2009, Syncrude said it was considering incorporating wet crushing technology in the construction of the Aurora South mine trains aimed at improving bitumen recovery levels, energy efficiency and product quality. The improvement in product quality would also allow for pipeline transportation and sales of surplus bitumen volumes.

With wet crushing technology, more crushing of the ore will be done at the mine face. Without this technology, vibrating screens are used to separate large lumps from the ore feed and trucks then haul this material away. With wet crushing, there will be fewer conveyors and trucks required and there will be no screens to maintain.

Secondly, Syncrude expects wet crushing to contribute to better recovery rates, as the large lumps that were previously rejected are now being broken down and the bitumen they contain recovered. Syncrude’s earlier commercial-scale pilot of wet crushing demonstrated positive results and the technology has been vetted through ExxonMobil’s TQM (Total Quality Management) process.

These growth plans would result in Syncrude broadening its production from the current light, sweet synthetic blend to a slate including heavy and sour blends. Decisions regarding further upgrading capacity will be considered in the future in the context of evolving heavy/light crude oil price spreads.

Under today’s economic conditions, we believe these expansion plans have the advantage of bringing on production growth with less project execution risk and better economics than constructing greenfield upgrading facilities. I believe that, given the size of Syncrude’s resource base, we still have the ability to grow beyond this expanded 600,000 barrel per day productive capacity level.

—Marcel Coutu, Canadian Oil Sands’ President and CEO

Cost estimates for these expansion plans are not yet available. The plans are subject to regulatory approval. As well, approvals from Syncrude’s joint venture owners and Canadian Oil Sands’ Board of Directors are required to move from scoping to detailed engineering work and then construction. ExxonMobil, majority owner of Imperial Oil, is providing the project management expertise under the Management Services Agreement between Syncrude Canada Ltd. and Imperial Oil.

Located near Fort McMurray, Alberta, Syncrude operates large oil-sands mines and an upgrading facility that produces a light, sweet crude oil on behalf of its joint venture owners, which include Canadian Oil Sands Limited, ConocoPhillips Oilsands Partnership II, Imperial Oil Resources, Mocal Energy Limited, Murphy Oil Company Ltd., Nexen Oil Sands Partnership, and Petro-Canada Oil and Gas (Suncor).

An independent re-evaluation of Syncrude’s resource base as of 31 December 2008 indicated proved plus probable reserves of 4.9 billion barrels of fully upgraded synthetic crude oil—a resource base large enough to support production of more than 500,000 barrels per day for decades.