Japanese invest in oilsands

Jacos to build $1.4B thermal project

AJapanese company that has been active in the oilsands since 1978 has approved construction of its first commercial project.

Calgary-headquartered Japan Canada Oil Sands Ltd. or Jacos confirmed Friday that its parent company, Japan Petroleum Exploration Co. Ltd. or Japex has made the final investment decision to proceed with its $1.4-billion, 20,000-barrelper-day Hangingstone thermal oilsands project south of Fort McMurray in northern Alberta.

The project is 25 per cent owned by Nexen Inc., which received federal approval a week ago to be taken over by Chinese-owned CNOOC for $15.1 billion.

In a message on its website, Japex president and chief executive Osamu Watanabe said the company wants to expand its reserves from 254 million barrels of oil equivalent as of March 31, 2010.

“Taking into consideration steady progress in each of our ongoing ventures including the oilsands expansion project in Canada, we are confident of lifting the volume of proved reserves owned to the established March 31, 2013, target of 350 million boe,” he wrote.

Tokyo Stock Exchangetraded Japex considers its core business to be natural gas and Watanabe added the company plans to boost domestic gas reserves and production capacity while stepping up LNG procurement activities overseas.

In a news release, the company said it “... also plans to consider the possibility of developing other oilsands leases, including Corner and Chard in the future, having the Hangingstone project as a basis.”

Jacos has been operating a steam-assisted gravity drainage demonstration project adjacent to the proposed project site for 13 years.

It applied for provincial approval of a 35,000-bpd project just two years ago and it was granted in November.

The pilot project is producing 6,000 to 7,000 bpd of bitumen, below its 11,000-bpd capacity in part because of natural declines from aging horizontal wells.

Japex said in a news release Friday the partners will commence fullscale development work aimed at production startup in the first half of 2016.

It said Nexen has approved the plan for the project but will not make a final investment decision until the first quarter of 2013. A Nexen spokesman said the company would not comment because it is not the operator.

Development is to be staged, with a 10,000-bpd expansion to follow successful startup of the first phase.

The companies estimate the life of the project will be about 30 years. Like most of its neighbours, Japex plans to thin the bitumen with condensate and ship it to U.S. refineries.

Jacos offices were closed Friday.

In an interview two years ago, Jacos president Toshi Hirata said the company was deliberately proceeding at a slower pace than rivals in the oilsands.

“We understand we are slower than Canadian competitors,” he said in a story in the Herald.

“We wanted to make sure we were fully prepared for expansion ... We are very comfortable now to go to the next stage and very confident to achieve our targets.”

The company entered the oilsands in 1978 — the year the video game Space Invaders was invented in Japan — when it “farmed in” on northern Alberta leases held by Petro-Canada (now Suncor Energy), Canadian Occidental (Nexen Inc.) and Esso (Imperial Oil).

All three of those partners have gone on to build successful commercial projects.

Jacos has the rights to leases covering 46,000 hectares in five areas of northern Alberta, with expected recoverable bitumen in place of 1.7 billion barrels.

Japex shares were publicly listed in 2003.