Canada's Imperial Oil, WorleyParsons Renew 5-Year Engineering Services Contract

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Researched by Industrial Info Resources (Sugar Land, Texas)--WorleyParsons Canada Services Limited (Alberta, Canada), the Canadian subsidiary of the Australian engineering and project services company WorleyParsons Limited (ASX:WOR) (New South Wales, Australia), has been awarded a five-year renewal to its contract with Imperial Oil Limited (TSX:IMO) (Alberta) and Syncrude Canada Limited (Alberta). In addition to the renewal, WorleyParsons also has been granted a five-year extension option.

The original contract began in 1991, when WorleyParsons was contracted to provide a full range of services for the Syncrude and Imperial brownfield projects. Currently, WorleyParsons has about 720 staff involved in the projects, and revenues are about $91 million per year.

Syncrude operates the Syncrude project, which is the top oil source in Canada. The project produces about 111.3 million barrels per year of value-added light sweet crude oil from the Athabasca oil sand complex. The Syncrude project is a joint venture owned by a number of oil and gas companies, including Canadian Oil Sands Trust (OTC:COSWF) (Calgary), which holds a 37% stake; Imperial Oil, which holds a 25% stake; Petro-Canada (ETR:PCA), which recently merged with Suncor Energy Incorporated (NYSE:SU) (Calgary) and holds a 12% stake; and ConocoPhillips (NYSE:COP) (Houston, Texas), which holds a 9% stake.

The oil sands of Canada contain vast reserves of economically recoverable oil, estimated at 173 billion barrels, making Canada the country with the second-largest reserves, after Saudi Arabia. Current production from the oil sands is about 1 million barrels per day (BBL/d), but by 2020 is expected to grow to nearly 4 million BBL/d. Even at these levels of extraction, the reserves are expected to be productive for more than 100 years.

The Athabasca oil sands contain large deposits of extremely heavy crude oil in the form of bitumen, and form the largest deposit of crude bitumen in the world. European explorers first discovered the oil sands in 1778, but it was not until 1962 that the first attempts to develop the oil sands were made by the government of Alberta through the Great Canadian Oil Sands Project, ultimately owned by Suncor. The Suncor project began production in 1967, making it the first oil sands operation in the world. The formation of the Syncrude consortium in 1964 triggered operations in 1978. By 1998, the project had produced 1 billion barrels of oil.

In May, Imperial Oil announced it had approved the first stage of a joint venture with ExxonMobil Canada, the Canadian subsidiary of Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), to develop an oil sands mining and extraction project at the Kearl oil sands, northeast of Fort McMurray, Alberta, where reserves of recoverable bitumen are estimated at 4.6 billion barrels.

Development of the Kearl project is planned in three phases, ultimately to produce an average of up to 300,000 BBL/d of bitumen. The first phase, costing more than $7.3 billion, is expected to be brought online in 2012 with a planned production of 100,000 BBL/d of bitumen. The two subsequent phases would each produce an additional 100,000 BBL/d over the expected 50-year lifespan of the project.

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