Imperial Oil launches $2-billion Cold Lake oilsands expansion

Imperial Oil’s Cold Lake project currently produces about 160,000 bpd using thermal methods, where steam is pumped into the ground to liquefy the bitumen deposits so they can be pumped to the surface.

Photograph by: Rick MacWilliam, Edmonton Journal

CALGARY — Imperial Oil Ltd. will go ahead with a $2-billion expansion of its flagship Cold Lake oilsands project, adding 40,000 barrels per day of new production to Canada’s largest thermal oilsands development.

The Nabiye expansion will tap a further 280 million of reserves at the northern Alberta project, Imperial said on Friday. It will also include a 170-megawatt cogeneration plant to produce steam and electricity and a facility to process the bitumen produced at the site.

The $50,000 per flowing barrel that the project will cost was more than expected by Randy Ollenberger, research analyst at BMO Capital Markets.

“It’s a little bit high,” said Ollenberger, who noted some cost inflation due to an oilsands industry many fear is getting overheated could have started creeping in, even at project sanctioning.

“The cost inflation everybody is worried about is the sort of stuff that comes after they’ve sanctioned the project, so when the price tag goes from $50,000 per flowing barrel to $60,000 per flowing barrel.”

he decision to move ahead by Imperial, majority owned by ExxonMobil Corp., was expected by industry analysts.

Imperial spokesman Pius Rolheiser said the company doesn’t yet have firm numbers on how many workers it will take to complete the expansion. Access to labour is a cost pressure increasingly being eyed in new oilsands projects and expansions on the horizon — though more so on the mining side — as Alberta’s labour market tightens beyond the height of the last boom.

“We have awarded some contracts, we’re in the process of awarding others,” said Rolheiser, who added more information will be available in the coming months.

As Imperial’s single largest producing asset, Cold Lake output is currently about 160,000 barrels per day, achieved though thermal methods, where steam is pumped into the ground to liquefy the bitumen deposits so they can be pumped to the surface.

“This expansion is key element of our plan to double production to over 600,000 oil equivalent barrels per day by 2020,” Rolheiser said.

The expansion is one of a number of multibillion-dollar projects aimed at boosting production from Canada’s oilsands, the world’s third-largest crude reserve and the largest single source of U.S. oil imports.

Production from the northern Alberta region is set to nearly double to three million barrels per day by 2020, though environmental groups concerned about rising greenhouse gas emissions and threats to wildlife and the boreal forest are pushing to slow development.

To counter those concerns, the federal and Alberta governments are set to unveil a new set of environmental monitoring criteria on Friday.

Imperial, Canada’s No. 2 oil producer and refiner, received regulatory approval for the expansion in 2004. Due to advances in technology available, the company made three amendments to the plan in 2009 that were approved in 2010, including the addition of a cogeneration plant, a modified site layout that means 40 per cent fewer drilling pads and sulphur dioxide recovery to reduce emissions.

The company’s shares were up 26 cents at $47.26 by early afternoon on the Toronto Stock Exchange.