February 3, 2010

Oilsands construction

Two more Fort McMurray projects moving forward

RICHARD GILBERT

staff writer

Fort McMurray’s construction industry continues to show signs of recovery as two more significant projects move forward. Total and ConocoPhillips are proceeding with the Surmont oilsands expansion project and Husky Energy received approval for the Sunrise oilsands project.

“We always intended to develop the next phase of the Surmont project at this time, and we’re excited to be moving ahead with it,” said Julie Baron, senior communications advisor with ConocoPhillips.

“The timing is ideal because we can build on the success of and experience gained from Phase 1 and we’ve seen some of the costs come down from where they were over the past few years.”

The Surmont project is about 60 kilometres southeast of Fort McMurray.

It is operated by ConocoPhillips Canada and is a 50/50 joint venture with Total E&P Canada.

Phase 1 began commercial oil production in late 2007 and is expected to reach peak production by 2012.

ConocoPhillips doesn’t disclose capital costs on a project-by-project basis, but some estimates put the cost of the Surmont expansion at $3.3 billion. Initial earthworks and construction are expected to begin in 2010.

It is expected that 2,500 jobs will be created during peak construction of Phase 2 and about 300 permanent jobs will be created.

“We have a commitment to local hire, buy and build, and a vast majority of the project’s labour and contracting needs will be sourced in Canada,” Baron said.

However, the size of this project and its similarity to other large projects in Alberta, means it is likely some materials and equipment will be sourced outside Canada.

The decision will be based on a number of factors.

“Where technically feasible and cost effective, we are encouraging sourcing and employment of local persons and companies for this expansion,” Baron said.

Surmont uses steam-assisted gravity drainage to recover the oil.

The expansion is expected to begin operations in late 2014.

Production is scheduled to begin in 2015.

In addition to this project, the Energy Resources Conservation Board set a Feb. 24, 2010 date for the start of hearings for Total’s proposed bitumen upgrader project near Fort Saskatchewan.

The final decision from Total of France won’t come until after the Joslyn mine project also wins corporate approval, which could happen in late 2011.

The mine and upgrader are an integrated project.

Late last month, Husky Energy Inc. also announced that it has completed front end engineering and design (FEED) for Phase 1 of the Sunrise Oil Sands project.

The company has also received approvals to proceed with the project.

The capital cost for Phase I (60,000 barrels per day) was initially estimated at $3.8 billion to $4.0 billion, but the recession has made it cheaper.

“Overall, the cost estimate for Phase 1 has been reduced by more than $1 billion through design optimization,” said John C.S. Lau, president and CEO of Husky.

The total cost of construction is currently estimated at $2.5 billion for the amended design.

Husky is preparing to issue requests for proposals for the central plant and field facilities. The first five well pads are being built and site preparation work for the central facilities will be finalized this year.

The detailed engineering, procurement, and construction phase could begin in the second half of 2010.

The Sunrise Oil Sands project, which is jointly owned by Husky and BP, is combining the production of bitumen with existing refining.

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