Plans unveiled for oilsands expansion

Canadian Natural Resources Ltd. said Thursday it will spend an additional $170 million this year to advance projects that could add almost 100,000 barrels per day of production at its Horizon oilsands mine in northern Alberta.

The Calgary-based company said its increased spending will be used to advance engineering and buy equipment for the projects which could be constructed through 2019 and 2020.

Canadian Natural will present “a clear execution strategy and cost estimates for those projects” to its board of directors in the fall for final approval, said president Tim McKay in an interview.

The Horizon facility has current capacity to produce about 250,000 bpd of synthetic crude oil, an upgraded oilsands product that fetches prices similar to benchmark West Texas Intermediate.

Canadian Natural previously noted the potential to add 30,000 to 40,000 bpd of non-upgraded bitumen. But on Thursday it said that project could be 10,000 bpd larger and would cost about $1.4 billion, implying a low capital cost estimate of about $31,000 per flowing barrel.

The project would use the same paraffinic froth treatment process employed at Suncor Energy Inc.’s Fort Hills and Imperial Oil Ltd.’s Kearl greenfield mines, but at about a third of their construction cost.

“We’re very fortunate to have excess capacity on the front end of our facility (in mining and ore preparation) and so we’re able to leverage that at a much lower cost. We’re able to utilize some of the existing equipment better,” explained McKay.

Overall production in the quarter rose by 15 per cent versus the same period last year to 1.05 billion barrels of oil equivalent per day, including 408,000 bpd of synthetic crude, Canadian Natural reported. The increase was mainly due to the purchase of Shell Canada’s oilsands mining assets last year.

Natural gas output fell seven per cent to about 1.5 billion cubic feet per day in the second quarter as the company, the largest gas producer in Canada, cut back its drilling program, deferred maintenance and shut down gas wells because of poor prices.

It said it also reduced its output of non-oilsands heavy oil and will divert funds from that budget to its light oil fields due to higher-than-usual price discounts.