AP
Chevron Buys Oil Sands Leases in Canada
Thursday March 2, 4:25 pm ET
Chevron Buys Oil Sands Leases in Canada, the Latest in a String of Investments in the Region
NEW YORK (AP) -- Chevron Corp. said Thursday it plans to develop a giant oil sands project in northern Canada, the latest in a string of investments that is quickly turning the region around Ft. McMurray, Alberta, into one of the world's fastest growing oil-producing regions.
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Chevron acquired leases for 180,000 acres from the provincial government in two separate sales. The San Ramon, Calif.-based company said there could be 7.5 billion barrels of oil in tar-like deposits there.
Chevron plans to use a steam-flooding technique to get the oil to flow into wells that typically recovers between 20 percent and 40 percent of the oil, said James Bates, vice president of operations for Chevron's Canada unit.
Bates said that ultimately producing 100,000 barrel a day is conceivable.
While Chevron acquired the leases for about 70 million Canadian dollars ($61.6 million), developing the project, called Ells River, is the most costly part of oil sands projects. Bates said he expected the price to run into the "billions" and could take a decade.
Chevron will spend the next couple years appraising the oil potential. Oil sands operations require extensive capital investments to upgrade the viscous oil extracted from the ground into something that can be run through refineries and turned into gasoline. Operating costs can also be quite high.
Major Western oil companies and international firms are clamoring to get involved in oil sands production. While it is more costly to get crude from the oil sands than it is from an offshore platform, high global crude prices have made oil-sands development attractive. Companies are also drawn to Canada's stable political and fiscal climate and the potential size of the resource.
"In terms of actual investments, over the next 10 years, we're looking at something on the order of 60 billion (Canadian dollars) plus," said Bill Wall, a technical specialist for the National Energy Board, the Canadian energy regulator. This investment could be constrained by shortages of skilled labor, potential environmental regulations and falling global oil prices.
Royal Dutch Shell PLC and Western Oil Sands each have the right to acquire a 20 percent minority interest in the project. Shell, Chevron and Western Oil Sands are partners on Muskeg River Mine, another oil sands project, near Ft. McMurray.
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Looks like maybe CVX was the mystery buyer at the latest lease sale? |
