IMPERIAL OIL GEARS UP FOR NEW GROWTH
Opportunities still seen in oilsands despite exodus of global competitors
Imperial Oil Ltd., the Canadian affiliate of Exxon Mobil Corp. — one of the few international companies still operating in Canada’s oilsands — is getting ready for another growth spurt in the Alberta deposits that could include green-lighting the new 150,000- barrel-a-day Aspen project early next year.
After years of regulatory review, Imperial hopes to receive a permit from the Alberta Energy Regulator in coming months, evaluate any related conditions and potentially proceed with a final investment decision in the first half of 2018, CEO Rich Kruger said Wednesday in an update with industry analysts.
Aspen would use new solventassisted SAGD technology that would be 25 per cent more capital efficient and produce 25 per cent fewer greenhouse gas emissions than other SAGD projects, he said.
It would be built in two phases, each of 75,000 b/d. Imperial, which has been testing the technology since 2010, said each phase would cost $2 billion, though it could change as the project evolves and depending on market conditions.
“I think we have a robust project to work with,” Kruger said. “We certainly want something that is globally competitive. Increasingly I have challenged our team (to) bring me a project that delivers double-digit returns in a $40-a-barrel world” to ensure it withstands oil price swings.
Competitors like Royal Dutch Shell PLC, Total SA and ConocoPhillips sold out of the oilsands after oil prices collapsed three years ago, as proposed pipelines failed to get built because of opposition from environmentalists and First Nations, and as governments toughened up climate change regulations.
Companies still in the business put new projects on hold, resulting in a collapse in re-investment to an estimated $13.2 billion in 2017, from nearly $33.9 billion in 2014, according to the ARC Energy Research Institute.
Kruger said his company still sees Canada’s resource as well positioned to meet future global oil demand, as long as costs stay competitive.
He said there is upside in taking a counter-cyclical approach, when more labour is available and quality of work higher.
The company, which is 70-percent owned by Exxon, wants to grow other oilsands projects, too. It plans to spend $550 million in the next two years to expand its Kearl oilsands mining project to 240,000 b/d, from 180,000 b/d this year.
Kearl is operating below capacity due to start up challenges, but is working on a plan to make operations more reliable, Kruger said. The incremental capacity would be added at a cost of $14,000 per flowing barrel and operating costs would be reduced to the US$20-abarrel range, from about US$24.
Imperial is also working with Exxon and partner Suncor Energy Inc. to improve reliability of the Syncrude oilsands project, where it’s a 25-per-cent owner, by avoiding the types of setbacks that in the past took it off-line for extended periods.
Like Suncor, Imperial is looking at driverless trucks to make its mining operations more efficient. “Autonomous haul trucks are on the table,” he said.
Another application of the solvent assistant SAGD could move forward at its Cold Lake project. Imperial has applied to regulators for a further expansion of 55,000 b/d.
Kruger said he doesn’t expect lack of pipeline capacity to stand in the way of his company’s growth plans because it will use rail transportation if required.
Imperial partnered with Kinder Morgan to build a rail terminal in Edmonton to provide transportation flexibility. The rail option has enabled it to reach a large number of refineries that are prepared to pay a premium for its bitumen, Kruger said.
“Rail is increasingly competitive,” he said.
“There are times when we look at the pipeline alternative, (but) the variable cost aspect of rail is a more attractive means for us to get to the mid-Western or Gulf Coast markets.”
I think we have a robust project to work with. We certainly want something that is globally competitive. RICH KRUGER, Imperial Oil CEO