Sept/Oct 2008

Wells to Wheels

Petro-Canada’s integrated approach in the oil sands

By P. Symons

Petro-Canada's Edmonton refinery

A few years ago, it was hard to imagine a barrel of oil reaching $140 or a Canadian dollar on par with the U.S. greenback. Today, with global energy demand hitting new levels, Alberta’s oil sands represent a critical source of supply and one of the few growth plays left in the global energy sector. It’s an exciting time for companies involved in the development of oil sands. For Petro-Canada, it means taking the expertise of an integrated energy company and putting it behind a strategy to get 10 billion barrels of high-quality contingent bitumen resource out of the ground and into consumers’ gas tanks.

As one of the few established industry players involved in the entire oil sands value chain — from production, including both mining and in situ production, to refining and, finally, marketing in our gas station network — the company is well positioned to develop the “Wells to Wheels” solution, and to do it right.

Leading the charge for Petro-Canada’s oil sands business is senior vice president Neil Camarta. As a former executive at Shell Canada, he knows first-hand the challenges with developing large-scale megaprojects. He took Shell’s $6 billion Athabasca Oil Sands Project from concept to startup. “Oil sands is a manufacturing business,” explained Camarta. “We start with a bitumen molecule stuck in the sand. Then we go through many steps to free that molecule from the sand and transform it into high-value petroleum products. Every transaction within the value chain has a profit margin. With Wells to Wheels, all links in the chain are operated by Petro-Canada. There are no transfers to leak away profit.”

A Canadian approach

Petro-Canada has more than 40 years of experience in oil sands development and production including its involvement with Syncrude, in which Petro-Canada maintains a 12 per cent interest. Other current Petro-Canada oil sands properties include the MacKay River in situ project (100 per cent Petro-Canada) that began production in 2002, and the Fort Hills oil sands project (60 per cent Petro-Canada), a fully integrated bitumen mining and upgrading project due to start production in 2011. The company also has plans for in situ assets at the MacKay River expansion (MRX); Lewis, which is approximately 40 kilometres northeast of Fort McMurray; and Meadow Creek, about 45 kilometres south of Fort McMurray.

“The key components of the Wells to Wheels project are the company’s MacKay River in situ project and its Edmonton refinery,” said Camarta. “The majority of the near-term bitumen feed stock will come from MacKay River.”

Located 60 kilometres northwest of Fort McMurray, MacKay River is one of the largest commercial SAGD projects in the Athabasca oil sands area. The bitumen resource at MacKay River totals 2.4 billion barrels, giving a lifespan of 25 to 30 years for the current plant and the planned MRX expansion. At mid-year 2008, the plant was producing up to 30,000 barrels per day from four central well pads containing 48 well pairs. Each well pair is drilled vertically more than 100 metres underground before extending horizontally 750 metres into the reservoir. Well pairs can produce up to 1,200 barrels of bitumen daily and have a life of 10 years before they are exhausted and the pads are reclaimed.

In early 2005, Petro-Canada acquired the Dover oil sands lease adjacent to MacKay River and then in 2006 purchased additional acreage from the province of Alberta. The bitumen resources on these lands more than suffice to support a second plant — MRX. This proposed expansion will add up to 40,000 barrels per day of bitumen, with first production tentatively scheduled for late 2011. A final investment decision on MRX is expected in Q1, 2009.

Beyond MacKay River, the Lewis property has a very significant high-quality resource base and will be capable of operations even larger than MacKay River. Meadow Creek is also an attractive development with its proximity to existing infrastructure.

At Fort Hills, Petro-Canada is developing a 160,000 barrel per day bitumen mining operation. Production from the project is expected to commence in the fourth quarter of 2011. The mined bitumen will be upgraded at the company’s Sturgeon Upgrader, currently awaiting regulatory approval. The light, sweet crude produced will be refined elsewhere.

Petro-Canada’s core in situ resources, including MacKay River, Lewis and Meadow Creek, amount to about 8.3 billion barrels. When combined with the company’s Syncrude interests and the Fort Hills mining project, Petro-Canada’s oil sands resources total more than 10 billion barrels.

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