Alberta is Home to More Than $23 Billion in Oil Sands Infrastructure Related Spending Scheduled for Construction in 2008

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Researched by Industrial Info Resources (Sugar Land, Texas). Alberta Canada has more than 315 billion barrels of recoverable bitumen reserves concentrated in the form of oil sands in three main sectors in northern Alberta. During 2005, 1.1 million barrels per day (BBL/d) of heavy oil were produced in Alberta that originated from oil sands formations. Between 2005 and 2015 over $125 billion will be spent in infrastructure related projects to increase production to over three million BBL/d by 2015. Enormous investments for open pit mines and thermal recovery projects will be required to coax the stubborn hydrocarbon resource from the ground, in addition to pipelines, storage facilities and upgrading & refining installations.

Industrial Info is tracking the progress 37 major infrastructure projects with a total investment value of approximately $23.675 billion in spending planned for construction in 2008 in Alberta Canada’s oil sands patch. The projects will have an average capital expenditure of $639 million and range from the truly massive $6 billion to the smaller $15 million facilities. When the projects are components of what is considered as an intergraded facility the costs can sky-rocket. A major example of this would be the planned $13.2 billion phase I of the Fort Hills project, which could begin construction as early as 2009, but is not included in the figures here but given as an example of how truly large these projects can grow.

The majority of the planned capital to be spent is in the upgrading and refining sector, which accounts $10 billion or 42% of the planned spending. This capital will be focused on eight new upgrading and refining facilities, including a refinery conversion to enable an existing refinery to process the heavier crude slate.

Twenty three of the projects being planned will be bitumen recovery related in nature. Seventeen will be thermal in nature and will involve the expenditure of $6.02 billion the remaining four recovery projects will be open pit mining schemes worth an estimated $5.82 billion in capital. The mining facilities are more labor intensive but can generally obtain recovery rates in the high 80% to low 90%. The thermal projects although less costly in nature typically have a lower recovery rate and are reliant on and to some extent held hostage by the price of natural gas which is consumed in the process of producing steam to inject into the ground to change the viscosity of the bitumen so it will become mobile and can be recovered. The Athabasca oil sands region surrounding Fort McMurray, Alberta could truly become the fastest growing demand market for natural gas in North America due to these facilities.

The remaining $1.235 billion in proposed spending incorporates the proposed pipeline expansions and new pipelines valued at $1.085 billion to connect the bitumen producing areas of Fort McMurray and the Peace River region with the refining markets near Edmonton, Alberta and the storage facilities of Hardisty, Alberta. The remaining balance of $150 million to be spent in the storage sector with the majority to be constructed in and around Hardisty and Edmonton, Alberta.

With the severe weather conditions that exist in this northern region the majority of the scheduled construction start-up are planned for the April 2008 to November 2008 time frame. These projects will take several years apiece to construct and will begin to come on line in 2010 and beyond with just over $1.2 billion or just over 5% reaching the start-up and in-service phase before then.

The $23.675 billion in construction start-up being planned to begin between January 1 2008 and December 31 2008 represents approximately 26% of the total $90.247 billion to be spent on 117 major oil sands related infrastructure projects scheduled for construction start-up in Western Canada beginning in July of 2007 and beyond that Industrialinfo is currently tracking and continually adding research to.

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