Total and ConocoPhillips Sanction Phase II of Surmount Oil Sands Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Global oil and gas companies Total SA (NYSE:TOT) (Paris, France) and ConocoPhillips (NYSE:COP) (Houston, Texas) have sanctioned Phase II of the steam-assisted gravity drainage (SAGD) development of the Surmount project in the Athabasca oil sands region of Canada. The project site is about 60 kilometers southeast of Fort Murray in Alberta. The Surmount project is a 50:50 joint venture by the wholly owned Canadian subsidiaries of Total and ConocoPhillips, Total E&P Canada Limited (Calgary, Alberta) and ConocoPhillips Canada (Calgary). Initial construction is scheduled to begin in 2010. On completion Surmount's bitumen production capacity will increase to 110,000 barrels per day (BBL/d) from the existing Phase I capacity of 27,000 BBL/d. Production of Phase II is expected to begin in 2015. Phase I began commercial production in 2007.

A thermal production technology, the SAGD technology used to recover bitumen from oil sands has limited impact on the environment and requires pairs of wells that are connected to long, horizontal drains. As a first step, steam is injected into the upper well of the reservoir, which reduces the viscosity of the bitumen. A mix of hot water and bitumen then flows to the lower well and is pumped to the surface. Surface processing facilities separate the bitumen and water. The water is then treated and reused by the steam generators. The separated bitumen is diluted and transported by pipeline to the upgrade and refining sections.

The Surmount lease agreements authorize the joint venture to operate over an area of 544 square kilometers. According to estimates made by Total, the Surmount permit has a full field development potential of more than 200,000 BBL/d of bitumen for a period of 30 years. The project is being developed in several phases.

The two companies are also working on technologies that will enhance energy efficiency and improve carbon dioxide capture and storage (CCS). They are working on various ways of injecting lighter hydrocarbons along with steam into the wells. This would reduce the amount of steam used in the process, and consequently a lower quantity of CO2 is emitted.

According to John Carrig, president and CEO of ConocoPhillips, the development of the oil sands plays a critical role in the future growth of oil production and in the short- and long-term economic and energy security of North America. He added that his company believed in the possibility of converting the crude oil obtained from the oil sands to usable fuel in an environmentally friendly way. He said that technological advancements would play a major role in achieving this target, which is why ConocoPhillips is actively pursuing the development of relevant technologies. In an effort to improve environmental and economic performance, ConocoPhillips intends to spend about $300 million on heavy oil technology research and development in the next five years.

Total is committed to use the most advanced technology available while implementing its projects in Canada. The company intends to ensure that its social and environmental performance is implemented in a responsible manner.

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