A 17% rise in West Texas Intermediate pricing since the start of the year has prompted two Canadian oil sands companies to revive deferred projects.
TSX- and NYSE-listed Cenovus Energy on Thursday announced that it will proceed in the first half of 2017 with the Phase G expansion of its Christina Lake oil sands project, in north-eastern Alberta, which was deferred in late 2014 owing to falling oil prices.
Since postponing the expansion, Cenovus has reworked the construction plan and rebid contracts for the project to reduce costs, realising more than C$500-million in project cost savings.
Cenovus expects to complete the expansion with go-forward capital investment of between C$16 000 and $18 000 per flowing barrel.
Phase G is about 20% complete and has an approved design capacity of 50 000 bbl/d gross. First oil from the expansion is expected in the second half of 2019.
The company has already spent about C$250-million on the expansion, and will require investment of between C$800-million to C$900-million more to bring the 50 000 bbl/d project on line by the second half of 2019.
Cenovus said it plans to invest between $1.2-billion and $1.4-billion in 2017, 24% more compared with the company’s forecast capital spending for 2016.
The company plans to increase its total oil production in 2017 by 14% to between 280-million to 300-million barrels of oil equivalents a day, compared with its 2016 guidance as Christina Lake Phase F and Foster Creek Phase G ramps up. Cenovus also expects its long-term oil sands sustaining capital to be close to C$7/bl, about 50% lower than in 2014.
“With the tremendous progress we’ve made over the last two years in reducing operating costs and sustaining capital, we’re confident we can move forward with projects that have strong potential to drive shareholder value,” Cenovus president and CEO Brian Ferguson said on a conference call. He stressed that the project’s revival was the result of cost reductions, rather to do with stabilising prices.
Canadian Natural Resource (CNR) last month also authorised a restart of development of the Kirby North expansion thermal oil sands project, with engineering and procurement starting in 2017. The company said it will focus on finding opportunities to continue further reduce construction costs to completion.
The project will add 40 000 bbl/d of targeted production volumes to Canadian Natural’s thermal oil sands portfolio.
Kirby North is expected to deliver first steam-in in 2019 with first oil targeted in 2020.
Canadian Natural expects to spend C$4.5-billion on capex in 2017, up from C$4.4-bllion in 2016.
On Wednesday, TSX-listed Crescent Point Energy announced a $1.45-billion capex budget for 2017, up 32% from the C$1.1-billion guidance this year, to grow output by 10%. Crescent Point is a conventional oil and gas producer, with most of its assets located in Saskatchewan.