Canada's Kearl Oilsands Project

A Hot Tip about Energy in Canada

Posted on: 13 Jan 2010

Summary

Imperial Oil's Kearl Oil Sands Project is located 75 kilometers Northeast of Fort McMurray, Alberta. When completed, each of the projects in three phases will produce 110,000 barrels of oil per day (bopd), with an ultimate goal of reaching 354,000 bpd once all three production trains become operational. The project involves four pits that will be mined over the next fifty years. Opportunities exist for U.S. companies that are involved in oilfield services, heavy machinery and construction, pipelines, consulting, land reclamation or other related industries.

 

London, England based engineering firm Amec has been selected to oversee the first phase of the US$7.7 billion project, and will be in charge of contracting engineering, procurement and construction management. Other major contractors include K2 Mining and Fluor. The first phase of the Kearl project is expected to create 1,100 - 1,300 jobs. Imperial Oil holds a 79% stake in the Kearl Project, with the remaining 21% owned by ExxonMobil Canada.

 

Imperial Oil has been in the energy business for over 125 years. They began with only a few wells in southwestern Ontario in 1880, and are now a multi-billion dollar player in the oil and gas industry. Imperial Oil made the Leduc Oil discovery in 1947, a watershed event in Alberta’s economic history that fueled Alberta's oil boom. Imperial Oil is headquartered in Calgary, Alberta, and is majority owned by ExxonMobil.

 

The majority of Canada's oil sands are located in northeastern Alberta, divided into the Athabasca, Cold Lake, and Peace River regions. It is estimated the Alberta's oil sands contain about 1.79 trillion barrels of bitumen, about 10% of which is recoverable with current technology. The total area of the oil sands is about 54,000 square miles, only a relatively small fraction, about 20%, can be developed from open pit mining methods. The remainder must be developed via in-situ technology, using drilling techniques. The Kearl Project will use an open pit mining method of extraction.

 

Market Overview

Total expenditure on the first phase of the Kearl Project will amount to $US7.7 billion. The details on phases two and three are still pending; however there is a possibility that phase three will involve the construction of a new bitumen upgrader. The amount of recoverable bitumen over the life of the project is estimated at about 4.6 billion barrels. Production will be underway by 2012, and is expected to span about 50 years.

 

The Kearl Project will employ the latest in technology including hydraulic shovels, trucks and double roll crushers. The process of converting bitumen to crude oil involves the extraction of raw ore from the site, which is then crushed and mixed with water. From there, it is fed through a pipeline to an extraction facility where the mixture is separated into diluted bitumen and tailings. The Kearl Project will not include any on-site upgrading, and the product will be shipped to market through third party pipeline systems.

 

The Kearl Project will require additional related infrastructure including a water pipeline to allow water to be withdrawn from the Athabasca River, as well as water storage, roads, and power lines.

 

Diluent:

Heavy oil from the oil sands is very viscous, and Northern Alberta's cold winters tend to compound this problem. Diluent is added to the bitumen (which is roughly the consistency of molasses or peanut butter) to decrease pumping and transportation costs. Diluents typically used for transporting bitumen include naphtha and condensate.

 

Inter Pipeline Inc. will be providing diluent to the Kearl Project. Imperial Oil has secured 60,000 barrels of diluent per day from the same pipeline that supplied the Athabasca Oil Sands project. Inter Pipeline will spend about $US130 million over the next 3 years to connect the existing pipeline to diluent receipt points near Edmonton.

 

Contracts awarded:

In June 2009, Imperial Oil and ExxonMobil awarded the contract for the transportation of blended bitumen to Enbridge Inc., which intends to fund the pipeline through internally generated cash flow. Babcock and Wilcox Canada has been contracted to supply the modularized boilers for the project, which will be manufactured in Ontario and Saskatchewan.

 

By Michael Simms and Crystal Roberts

Read the full market research report


Posted: 13 January 2010

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