The bitumen-rich mining district around Fort McMurray is less than a tenth of one per cent of Alberta’s total area, but its industrial footprint is
enormous and growing. With seven mines in operation, an eighth will start up by year’s end, and another five are in development.
Infrastructure development, however, has needed time to catch up. Concerns about a secure and steady supply of labour remain, and scrutiny of
environmental permitting and monitoring practices is only growing more intense. These constraints may shorten the developers’ stride but, nevertheless,
production continues to accelerate. For 2012, the Canadian Association of Petroleum Producers (CAPP) predicts that crude oil production from surface mines
will average 862,000 barrels per day (bpd), up 11 per cent from 2011.
The long view
While there is adequate pipeline capacity in the region, each new operation must secure its connection to the existing network. It is one reason the
estimated cost of building Imperial Oil’s Kearl mine rose in 2012 from $5 per barrel to $6.20 for the 4.6-billion-barrel resource.
“Our previously communicated $5 a barrel does not include the investments – which are significant – that we made in our tailings management plan, as well
as an investment in some regional downstream pipelines,” says Pius Rolheiser, Imperial spokesperson.
Regional pipelines will still need to connect to larger lines, but Rolheiser is optimistic that large-scale infrastructure will evolve over Kearl’s
anticipated 40- to 50-year life. “Our plans are not tied to any one piece of infrastructure,” he says. “We believe that by the time Kearl volumes come on
stream, there’ll be sufficient pipeline capacity to get that product to the market.”
By the end of the year, Kearl’s initial development will be producing 110,000 bpd. An estimated $8.9 billion expansion phase will increase production to
about 290,000 over the next several years. The debottlenecking of both phases will ultimately increase overall capacity to 345,000 bpd by about 2020.
Suncor has also been pouring cash into new developments: the North Steepbank Extension mine will ramp up to a production level of 125,000 bpd this year.
The company also continued site preparation on the much larger Fort Hills project and associated Voyageur upgrader, joint ventures with Teck Resources and
Total E&P respectively, but those projects will not receive a final development decision until 2013.
Total’s majority-owned Joslyn North project saw some initial construction following regulatory approval in December 2011. If the $7-billion to $9-billion
project goes forward, it will feed the Voyageur upgrader with enough bitumen to produce 100,000 bpd for 20 years, beginning in 2018.