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Imperial Oil Ltd. received a tidbit on Halloween with the long-awaited approval of provincial regulators for its new Aspen Oil Sands Project.
Now you have to build it.
Nearly five years after filing an application for project approval with the Alberta Energy Regulator, the integrated oil producer announced Wednesday that it would build the $ 2.6-billion development in northern Ontario. Alberta.
For the province and the sector, the announcement is significant.
It is one of the first major oil sands projects to be implemented since the collapse of crude prices almost four years ago.
As large-scale developments and expansions are largely completed, this will create about 700 jobs when construction peaks, and more than 200 workplaces once built.
Expenditures will reach about $ 700 million a year in 2019-21, a much needed boost as capital spending on oil sands has declined for four consecutive years.
Construction will begin this quarter and Aspen is expected to add approximately 75,000 barrels of bitumen per day by 2022.
This is a positive sign when a major player like Imperial, with its majority shareholder Exxon Mobil Corp., is ready to invest in increased bitumen production, even with the sadness surrounding the challenges posed by the Canadian pipeline.
In addition, the project shows that oil sands producers can reduce their costs and greenhouse gas emissions per barrel, a prerequisite if the largest sector in Alberta plans to significantly increase production in a world subject to carbon constraints.
"We have an extremely important resource in the oil sands – Canada and, of course, our society. It will not be competitive in the global sense, "said Rich Kruger CEO on Wednesday.
"But projects with the highest quality resources can develop and apply advanced technologies or new technologies. . . we believe that these selected projects have a place in the world energy world.
Unlike other commercial oil sands projects, Imperial will inject solvent vapor underground to improve bitumen production.
Imperial says the technology will reduce emissions intensity and per-barrel water consumption by up to 25 percent compared to conventional steam badisted gravity drainage (SAGD) projects.
For those who viewed the oil sands as hitting the wall – or made uncompetitive by American shale oil games – this proves that future investments can go forward under the right circumstances.
"It's a sign of hope, it's the global economy. . . are in a place that can withstand future (project) sanctions, even if the local environment can not, "said badyst Kevin Birn, Director of the Canadian Oil Sands IHS Markit.
"This is a turning point in terms of sanctioning a project, the promise of technology and the reduction of emissions intensity. They can break many stereotypes in this project, which is very good for the industry. "
The decision also shows that companies did not sit idle during the economic downturn, using the time they had to rethink developments, look for places to cut costs and improve efficiency.
Birn pointed out that the cost of adding Aspen 's new production was about 30 to 40% lower than the industry averages observed during the boom period of 2014.
For Imperial, the company follows a counter-cyclical strategy, which should give it access to a skilled workforce and cheaper materials, thus avoiding fiscal erosion as it does. has been observed in recent years.
The news comes at a fortuitous time for the hard-hit sector, given the bearish sentiment of investors, the exodus of several oil sands multinationals, and ongoing problems with pipelines.
Since 2014, capital spending on oil sands has grown from almost $ 34 billion to about $ 12.3 billion this year.
Last week, the National Energy Board forecast that oil production in Canada would increase by 58%, reaching nearly 7 million barrels a day by 2040.
But that means we can find export markets and Canadian oil can be transported to those places, which is not badured given the battle we're going over with pipelines.
Kruger noted that Imperial Oil was able to increase oil shipments via its own rail loading facilities and the company badyzed Aspen according to different transportation options.
As one of Canada's largest producers and the largest refiner in the country, Imperial Oil is also increasing production at its Kearl oil sands mine from about 200,000 barrels per day this year to 240,000 barrels per day. in 2020, spending $ 550 million.
Now, a project is not sure that the money is about to be reinjected into the oil sands.
This is not it.
Market access remains a major problem and Canadian oil prices are expected to rise for significantly larger investments to flow into the Fort McMurray area.
ARC Energy Research Institute Executive Director Peter Tertzakian pointed out that smaller, smaller projects are likely to drive future oil sands growth, not expensive developments.
Only a few companies have the existing infrastructure and refining badets – and transportation options – that Imperial Oil does not offer to make such investments.
"We should see it as a positive sign that a global multinational recognizes that we can do better and that it is a worthy place to invest," Tertzakian said.
"Some players have the right combination of things to develop. All do not have that.
And deeper questions about rising emissions from the oil sands will not go away. The Alberta government has already adopted a cap of 100 megatonnes of emissions from the sector.
"The industry needs to do more to reduce the carbon footprint of the entire industry, in an absolute and intensive way," said Benjamin Israel, senior badyst at the Pembina Institute, in a statement. communicated.
An investment will not change the dynamics of the entire oil sands sector.
But it will help.
And after a long wait of five years, it's finally a treat – and not a trap – for the Imperial project in Aspen.
Chris Varcoe is a columnist for the Calgary Herald.
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