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The Edmonton Journal (Canada)

Surmont Oilsands Expansion Given Green Light

Dave Cooper

EDMONTON - Alberta's oilsands got a major boost Tuesday with an announcement that the Surmont oilsands expansion has been given the green light.

Project partners Total and ConocoPhillips said in a joint news release that construction of Phase 2 would start this year at the site southeast of Fort McMurray.

The steam-assisted gravity drainage (SAGD) project will boost production at Surmont from 27,000 to 110,000 barrels of bitumen a day by 2015.

Production from Surmont's first phase, with an estimated price of $1.4 billion, started flowing in late 2007.

"Surmont is an important part of our oilsands portfolio and we're pleased to announce its next phase of development," John Carrig, president and chief operating officer of ConocoPhillips, said.

"The oilsands are an area of significant future oil production growth and are important for short- and long-term energy and economic security in North America. This phase of Surmont will also result in a significant increase in construction and operating jobs."

Total E&P Canada Ltd. has said the Surmont project is a key part of the French firm's integrated strategy for the oilsands.

The Surmont pilot project began in 1997. In 2003, the joint venture decided to launch the first phase of its commercial development using SAGD. First steam was injected into the ground in June 2007.

Conoco didn't disclose how much it's spending on the new phase of the project.

Conoco spokesman Charlie Rowton said one factor in the decision to move ahead with the project was that the cost of oilsands projects has come down over the last year.

The decision to move ahead with the Surmont expansion comes a month after Conoco said it would cut capital expenditures by 10 per cent this year in an effort to cut costs and increase profitability. The company identified its Canadian oilsands projects as one of the key areas where it would continue to focus spending.

In addition to the Surmont project, Conoco has a nine-per-cent stake in the Syncrude joint venture - which it is considering selling - and is a partner with EnCana Corp. in its Foster Creek and Christina Lake enhanced oil projects.

Total, through its wholly owned subsidiary, Total E&P Canada Ltd., is also planning mining operations at its Joslyn lease and an upgrader east of Fort Saskatchewan.

The Energy Resources Conservation Board has set Feb. 24 for the start of hearings on the 150,000-barrel-a-day facility, which would double in a second phase.

An ERCB decision could take several months, but a final green light from Total won't come until after the 200,000 bpd Joslyn mine project also wins corporate approval, possibly in late 2011. The mine and upgrader are an integrated project.

"Our bet is on the long term. This upgrader will be operating for 30 or 40 years," Jean-Michel Gires, president of Total E&P Canada, told The Journal in November.

"We have a commitment to the oilsands, and our one refinery in Texas is not being targeted as an outlet for our Canadian bitumen," he said.

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