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Petroleum News: Western Canada: And look what we have here….

Gary Park
The oil sands grab bag is never short of surprises, setbacks and successes.
Take the last week of February.
Here’s some of what emerged:

• The Shell-Canada-operated Athabasca project is adjusting to the heaviest blow of its commercial existence, which started in mid-2003, scaling back production to one-third of normal levels of 155,000 barrels per day as it prepares for a complete shutdown that could last two weeks at the end of March.

Trouble surfaced Feb. 24 when a major tear was discovered in a conveyor belt that carries bitumen from the Muskeg River Mine to a nearby extraction plant.
Following a brief halt, operations resumed using an undamaged portion of the belt and Shell Canada hopes to sustain that level of output until the repair work starts.
Part of its challenge is to avoid a shutdown of the Scotford refinery near Edmonton. Various options are being pursued, including a search for feedstock from external sources, to avoid the high cost of an entire refinery closure.
A further cutback will occur in May to allow a scheduled maintenance turnaround.
How much production will be lost during that work is not known.
Shell Canada has a capital budget of C$385 million for its 60 percent share of Athabasca this year — Chevron Canada and Western Oil Sands each hold 20 percent — including a de-bottlenecking to sustain its most recent production numbers over at least three years.
Last year, Athabasca surpassed its design capacity, averaging 159,900 bpd for 2005 and climbing to 178,000 bpd in the final quarter. The 2009 target is 180,000 bpd.
The shutdown was not good news for the consortium, especially Western Oil Sands, which saw its share of output rise 18 percent in 2005 to 32,000 bpd, which has prompted the junior partner to start evaluating four to six potentially significant project opportunities.
• Canadian Oil Sands Trust, which owns 35 percent of the Syncrude Canada consortium, the world’s largest source of synthetic crude, is about to make its unit holders even happier — especially those who bought in at the original C$10 a unit.
The trust plans to split its units 5-for-1 to make them more affordable provided it gets investor approval April 25.
Over the past year, the trust has soared past the C$150 mark. It currently makes quarterly per-unit payments of C$1.
• The Alberta government has bowed to community and industry pressure by agreeing to spend C$500 million to twin a deadly stretch of the 270 mile highway between Edmonton and Fort McMurray, with the Canadian government kicking in another C$150 million.
The existing two-lane route is a major traffic bottleneck for workers and goods serving the booming oil sands.
It has also been blamed for several deadly accidents, including an accident involving a chartered workers’ bus and semi-tractor trailer last year that claimed four lives.
Early this year, two other oil workers were killed when their minivan was hit by a log flying off a truck that had swerved to avoid a collision.
• Canadian Natural Resources said its Horizon project is slightly ahead of schedule for start-up in 2008, with first phase construction 20 percent complete, but it faces a tough challenge to increase its workforce from 1,700 to more than 4,000 by year’s end. The first phase is forecast to produce 110,000 bpd, followed by 232,000 bpd in 2011 and 488,000 bpd within 12 years.
• Nexen and OPTI Canada plan to spend another C$360 million on their Long Lake project, 10 percent above the C$3.5 billion budget.
But they’re not blaming the hike on project overruns that are the curse of the oil sands sector. They said C$250 million will be used to increase the generation of steam, which is injected under pressure to melt deep bitumen deposits.
That will lower the chances of poor bitumen production results, the partners said.
Another C$110 million will be spent on a facility to process soot, a byproduct of Long Lake’s gasifier, cutting operating costs to handle the soot to 30 cents a barrel from a little more than C$1.
• Startup BlackRock Ventures has logged a hefty increase in its oil reserves, which could bolster the potential of its Orion project.
The company now recognizes 195 million barrels of proven and probable reserves and 65 million barrels of possible reserves, allowing it to book an increase of 2235 million barrels of total reserves.
Orion is designed to start operations at 10,000 bpd in mid-2007 and could attain 20,000 bpd over an operating life of more than 30 years.

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