Athabasca Oil Sands Project to Expand Canadian Synthetic Crude Oil Production

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Athabasca Oil Sands Project (AOSP), a joint venture of Calgary, Alberta companies Shell Canada Limited (60%), Chevron Canada Limited (20%) and Western Oil Sands, Incorporated (20%) (NYSE:WTO), is planning to increase production of synthetic crude oil by over 300,000 barrels per day in the next eight to ten years. AOSP initiated fully integrated operations on April 19, 2003, and is currently producing 155,000 barrels per day of synthetic crude oil. The operation consists of the Muskeg River oil sands mine located on Lease 13, approximately 75 kilometers north of Fort McMurray, Alberta, and the Scotford upgrader located adjacent to Shell Canada’s Scotford refinery near Fort Saskatchewan, Alberta. The upgrader supplies synthetic crude to Shell’s Scotford refinery and its Sarnia refinery, as well as supplying crude to Chevron’s Salt Lake and Burnaby refining operations. The balance of the crude is sold to other refiners.

AOSP is planning a multi-phased approach to its upgrader expansion plans. The first project will be to debottleneck the upgrader, and in turn add an additional 25,000 - 40,000 barrels per day of capacity. The debottleneck carries an estimated capital value of over $250 million and is expected to enter the construction phase in either late 2006 or early 2007, with a completion date slated for some time in the 2008/2009 time frame. AOSP has retained the services of Fluor Canada (Calgary, Alberta) for the front-end engineering and design (FEED) for the debottleneck and Bechtel Canada Company (Calgary, Alberta) was selected as the major contractor for the upgrader expansions.

AOSP is also planning further expansions to the Scotford upgrader, as well as upstream expansions to the mining facilities. The upgrader will be expanded in three separate, but consecutive 100,000 barrels per day expansions. The consecutive nature of the expansions will space the completions for each phase of expansion roughly two years apart. As things stand now, the 100,000 barrels per day expansions have their completions slated for 2009, 2011 and 2013. That could easily change to 2010, 2012 and 2014, depending on the resources that could be brought to bear on the project and the availability of those resources when there are so many upgrader projects currently being proposed in Alberta.

The upgrader expansions will be accompanied by expanding mining operations to Lease 13 West and constructing new mining operation on Lease 90, which is just south of the existing Lease 13 mining operation. The two leases, in conjunction with three other Leases, 17, 88 and 89, hold approximately 9.7 billion barrels of bitumen. Terasen, Incorporated owns and operates the 493-kilometerCorridor Pipeline system that connects the Muskeg River mine and the Scotford upgrader. To supply bitumen to the upgrader, Terasen intends to implement its own $400 million pipeline expansion to loop the pipeline and add seven or eight electric drive pump sets.

If all this development activity comes to pass, then AOSP will have a total synthetic crude oil production of approximately 500,000 barrels per day. There is early talk of a further 300,000 barrels per day of synthetic crude production after this round of debottleneck and expansions.

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