Oil Sands Prospects in Canada Given Total Focus

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Researched by Industrialinfo.com (Researched by Industrial Information Resources Incorporated; Houston, Texas). TotalFinaElf (TOTF:PARIS) (Paris, France) will be using its heavy-oil expertise, gained mainly in Venezuela operating the $4.2 billion Sincor project in the Orinoco belt, to the Surmont northern Alberta oil sands project. The French company has acquired half (43.5%) of ConocoPhillips (NYSE:COP) (Houston, Texas) 87% interest in the project with Devon Energy holding the remaining balance of 13%.

ConocoPhillips has been planning a $700 million plant at Surmont to start production by 2004. At least 100,000 bpd of oil is expected from the project by 2014. The area contains massive oil sands reserves of 5-10 billion barrels of recoverable oil from extra heavy crude-like bitumen and about 42 million cubic feet of gas. At the present time the existing technology does not allow the two sources of energy feedstock to be recovered at the same time.

Surmont covers 548 square miles and is made of four adjacent licenses about 80 kilometers southeast of Fort McMurray where an oil sands thermal extraction project began about five years ago.

The Surmont oil sands upgrader project will give TotalFinaElf a base for expansion in North America where it currently owns a 156,000 bpd refinery in Texas.

Champions of the Canadian oil sands, which are claimed to hold as much recoverable oil as Saudi Arabia, see Total, ExxonMobil (NYSE:XOM) and Shell (LSE:SHEL) (London, United Kingdom) as players in the oil sands fields with other operators such as BP now encouraged to take an interest.

Husky is looking at a $1 billion expansion of its upgrader at Lloydminster, Alberta and Canadian Natural is planning a $2.8 billion upgrader as part of its $6.3 billion Horizon oil sands project which is scheduled to start producing 230,000 barrels of bitumen per day in 2008.

By 2010 a glut in bitumen is expected which will bring priced down and widen the gap between heavy and light/synthetic crudes. This prospect is exercising oil company planners. Petro Canada is considering an outlay of $2.7 billion to expand and convert its existing refinery in Edmonton to use bitumen as a feedstock. Price and volume production from the upgraders could produce a period of bonanza-like income for those who get the timing of new and upgraded plants right. Companies with a vertically integrated structure leading to servicing the end user should score in comparison to those upgraders who do not make downstream marketing alliances.

Total is geared to looking for unconventional oil reserves on a worldwide basis, from ultra-deep offshore Angola to the North Sea with high temperatures and pressures. Its entry into the oil sands of Canada signals a wake up call for industry watchers and companies.