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Imperial braves Canadian price slump with new $2.6-billion oilsands project

Imperial braves Canadian price slump with new $2.6-billion oilsands project

 

Imperial Oil Ltd. is going ahead with its $2.6 billion Aspen oilsands project even as Canadian heavy crude is selling at the lowest prices in at least a decade.

The producer, which is majority-owned by Exxon Mobil Corp., said it made a final investment decision to build the so-called solvent-assisted, steam-assisted gravity drainage site in northern Alberta, and that it will produce 75,000 barrels a day of bitumen once it starts operation. Construction will start in the current quarter and is expected to be completed in 2022.

Aspen would be one of the biggest new oilsands projects to proceed since global crude prices collapsed in 2014 from more than US$100 a barrel.

The decision comes as pipeline bottlenecks and delays in building new export lines widen the gap between Canadian heavy-crude prices and global benchmarks.

“We do not take investment decisions lightly, particularly in these challenging times,” Rich Kruger, Imperial chairman, said in the release. “We have made the decision to proceed now because we believe this advanced technology will further the evolution of Imperial’s oilsands business.”

The project will use technology that could reduce greenhouse gas emissions intensity and water use by as much as 25 per cent versus traditional steam-assisted technology, Imperial said. The project could be expanded by another 75,000 barrels a day “with timing dependent on a number of factors, including foundational project performance and overall business and market conditions,” the company said.

The discount on Western Canadian crudes has hit record levels this year, as rising output from Alberta’s oilsands has run up against chock-full pipelines, leading to higher volumes stuck in storage.

While crude by rail volumes are rising, hitting a record near 230,000 barrels per day in August, they are not yet at levels needed to clear the glut.

The situation has prompted a number of major Canadian producers to say they will not go ahead with any new projects or expansions until more pipeline capacity is in place.

But the situation is improving. Enbridge Inc said last week it expects its Line 3 project to be in service in late 2019, while TransCanada Corp said it is working to start construction on its Keystone XL pipeline next year.

The last major oil sand project to be approved in Alberta was the Suncor Energy Inc-led Fort Hills project in 2013, which is now ramping up to full output.

Source: Calgary Herald

https://calgaryherald.com/commodities/energy/update-1-imperial-oil-to-build-new-canada-oil-sand-project/wcm/57864472-33c3-4593-b651-ae4f87a82b8c

Published: 08-11-2018

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