Canadian Companies Team Up to Develop a $2 Billion Synthetic Crude Oil Production Facility in Canada

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Nexen Incorporated (Calgary, Alberta) (NYSE and TSE:NXY) and OPTI Canada Incorporated (Calgary, Alberta) have teamed up in a fifty-fifty joint venture to develop the Long Lake Bitumen Project in the Athabasca region near Anzac, Alberta. The project will be based on an oil sands formation and will utilize steam assisted gravity drainage (SAGD) technology for extraction. This technique involves the drilling of horizontal wells in parallel pairs, one above the other. The upper pipes inject steam into the reservoir to change the viscosity of the bitumen so it can be pumped to the surface through the lower pipes.

Once on the surface OPTI will use its patented OrCrude technology in the field upgrader to convert the bitumen into 22 API synthetic crude. In order to make the crude attractive to refiners it will be converted into 37 API using a specialized on-site hydrocracker. OPTI's field upgrader will remove the asphaltines and use this byproduct as a feedstock for a gasifier to produce a hydrogen rich fuel gas for on site use as a replacement for the need of an outside source of natural gas. Since the SAGD process consumes a high amount of electricity to generate the steam needed for this process, the majority of this fuel gas will be used to power a 370 megawatt cogeneration facility.

Construction is scheduled to begin in 2003 with a 2006 target date for completion. When completed the facility will produce 70,000 barrels per day of product and further expansion phases will be undertaken.

Colt Engineering Corporation (Calgary, Alberta) has been awarded the front-end engineering contract for the project.

Nexen has secured oil sands properties in Alberta with a resource of 5 billion barrels in place and an estimated probable recovery rate of fifty to seventy percent. Since light oil production in the U.S. is decreasing yearly, the majority of the production will be exported to the U.S. Nexen has assets worth over $3.5 billion as of September 2002 and has pursued an aggressive investment program in 2002 worth over $600 million focused in Canada, Australia, Yemen, and the Gulf of Mexico. Nexen's revised daily production outlook for 2002 was set at 270,000-272,000 barrels per day.