Exxon's Imperial Oil Seeks Approval for New Canadian Oil-Sands Project
March 11 2016 - 6:28PM
Dow Jones News
By Chester Dawson
CALGARY, Alberta--Exxon Mobil Corp.'s Canadian unit said Friday
it has applied for regulatory approval of an oil-sands project that
could start daily production of 50,000 barrels early in the next
decade.
The proposed project, valued at 2 billion Canadian dollars ($1.5
billion), appears to buck a broader industry trend in which many
oil-sands producers have canceled or postponed planned development
of projects due to sliding crude prices and uncertainty about the
impact of new environmental policies in Canada.
Imperial Oil Ltd., in which Exxon owns a controlling 69.6%
stake, said the new Midzaghe project would use a new technology
designed to reduce greenhouse gas emissions by 25% and potentially
double production levels in comparison with existing extraction
methods.
The company remains undecided on whether it will proceed with
construction even if the government approves the project. "The
filing for regulatory approval is a preliminary step and no
investment decision has been made," said spokeswoman Lisa
Schmidt.
That decision will be based on a number of factors, including
the outlook for commodity prices and how its ability to provide a
return on capital compares with the potential of competing projects
in the company's portfolio, she said.
New oil-sands well projects typically require benchmark West
Texas Intermediate crude prices to trade above $65 a barrel to
break even. Current prices below $40 a barrel have made it
challenging to justify investment to develop projects in Canada's
oil sands.
Imperial had previously said it planned to seek permission for
the Midzaghe in northeastern Alberta from the provincial government
in early 2016. And the company said last fall that it planned to
use the promising new extraction technique at another proposed oil
sands site called Aspen.
A decision on construction of Aspen is expected as soon as next
year, pending regulatory approval. if it moves ahead, it would be
the first commercial use of the new technology, Imperial said.
Pilot tests conducted by the company using a modified form of
its steam-assisted gravity drainage, or SAGD, technology showed a
nearly 30% increase in production of heavy crude leached out of
underground oil sands wells. The new technique involves adding a
chemical solvent to improve the flow of oil to the surface and
reduce the need for steam made with generators fired by natural
gas.
Rich Kruger, Imperial's chief executive, told investors at a
meeting in September that this innovation, called SA-SAGD, could
double the volume of output from at least seven proposed oil sands
projects, including Aspen and Midzaghe
Raising production while lowering greenhouse gas emissions may
help Imperial cope with new regulations and taxes designed to limit
the industry's carbon footprint. The government of Alberta has
raised its carbon tax on large-scale emitters and vowed to impose a
100 million metric-ton cap on such emissions from oil sands
production.
The industry currently emits 70 million metric tons of
greenhouse gases a year and the Canadian environmental ministry has
projected that emissions from oil-sands productions will hit 103
million metric tons annually as soon as 2020.
Write to Chester Dawson at chester.dawson@wsj.com
(END) Dow Jones Newswires
March 11, 2016 18:13 ET (23:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Imperial Oil (AMEX:IMO)
Historical Stock Chart
From Aug 2024 to Sep 2024
Imperial Oil (AMEX:IMO)
Historical Stock Chart
From Sep 2023 to Sep 2024