Regulatory Approval Granted for $1.3 Billion Phase II Fort McMurray Long Lake Upgrader Expansion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Nexen Incorporated (NYSE:NXY) (Calgary, Alberta) and joint venture partner OPTI Canada Incorporated (Calgary) received regulatory approval in February for Phase II of the Long Lake upgrader project, which has an estimated total investment value of $1.3 billion. Phase II will double Phase I's bitumen capacity, which came online in 2008. Phase II will add an additional 70,000 barrels per day (BBL/d) of steam assisted gravity drainage (SAGD) bitumen.

Nexen is the operator of the refinery. OPTI has a 35% interest in the Long Lake Upgrader project. The partners have opted to defer final sanctioning for Phase II until late 2011 for financial reasons, which include market conditions, as well as wanting to become more acclimated to the refinery's operations after the first phase of construction. The companies also want to be certain they have a full understanding of the carbon-dioxide emissions regulations in order to make sure that new construction is compliant with environmental regulations.

Fluor Canada Limited (Calgary), a subsidiary of Fluor Corporation (NYSE:FLR) (Irving, Texas), performed the engineering and construction on Phase I and is currently doing the front-end engineering and design (FEED) work for the second phase. Construction is slated to begin mid-2012 and continue through spring 2014. Once complete, the facility will have a processing capacity of 140,000 BBL/d.

The second phase will include several processing units. A 70,000-BBL/d crude and vacuum unit will be installed, utilizing OPTI's proprietary Orcrude process technology. Also being installed are a 50,000-BBL/d hydrocracker, a 300-ton-per-day sulfur-recovery unit with a supporting tail gas unit, a gasification unit, an air separation unit, and flare-recovery system. There will also be a 35,000-cubic-meter steam-generation facility constructed with the required pollution-abatement equipment to ensure all air quality standards are met. There will be bitumen recovery wells and a pipeline to deliver the recovered bitumen from the Phase II to the Phase I processing area for product upgrading, as well as another pipeline to deliver syngas from the Phase I processing area to Phase II.

The total Long Lake Upgrader expansion consists of six phases. When all six phases are complete in 2020, the total bitumen capacity for the refinery will be 432,000 BBL/d. Synthetic crude capacity will be 351,000 BBL/d.

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