Imperial Oil proceeding with $2.6B Aspen oilsands project

CALGARY — Imperial Oil Ltd.’s commitment to begin construction this year on its $2.6-billion Aspen oilsands project in northern Alberta comes less than a week after it received long-awaited approval from the Alberta government.

The speed of the announcement Tuesday surprised observers who have watched Calgary oilsands rivals including Canadian Natural Resources Ltd., Cenovus Energy Inc. and MEG Energy Corp. announce production cuts to avoid steep discounts currently being paid for Western Canadian Select bitumen blend oil.

Imperial’s project would add 75,000 barrels per day of bitumen production to current output of about 300,000 bpd, but won’t start up until 2022, by which time many observers predict that new pipeline capacity will ease export bottlenecks and restore normal pricing levels.

“As we look at a three-and-a-half-year construction project execution period, we think the dust will settle in some of these areas and a project that has as many advantages as Aspen does, we’re confident it will be a globally competitive investment,” CEO Rich Kruger told media on a conference call following Imperial’s investor day in Toronto on Wednesday.

He acknowledged that the company is counting on government to ensure pipelines are built in time for project startup. Enbridge Inc.’s Line 3 replacement oil pipeline project is expected to be in service in late 2019 and one or both of TransCanada Corp.’s Keystone XL pipeline or the federal government’s Trans Mountain expansion are expected to be in service a year or so later.

Meanwhile, crude-by-rail exports from Canada rose to a record 230,000 barrels per day in August.

Imperial has signalled it will increase rail use to 170,000 bpd in the first quarter of 2019, up from an average of about 80,000 bpd over the summer, from its coowned railway terminal near its Edmonton refinery.

In situ oilsands projects which produce bitumen from wells have an advantage over open pit mines such as Imperial’s nearby Kearl project that opened in 2013 and was expanded in 2015, Kruger said.

“Our view is with the large resource base, with the history of innovation and responsible development, that the highest quality oilsands can and will be competitive on a global basis, not all oilsands,” he said during his investor day presentation.

“We see in situ as having fundamental advantages today over new greenfield mining developments.”

Imperial decided to go ahead with construction during a slow time in the oilsands because it hopes less competition will save money on labour and component costs, said Theresa Redburn, senior vicepresident of commercial development.