CALGARY -- Canadian Oil Sands Trust said on Wednesday it is formulating plans to boost production at Syncrude Canada Ltd, the country’s biggest oil sands project, by more than expected by 2020.
The trust, whose 37% stake in Syncrude makes it the project’s biggest shareholder, also said that increased production at the northern Alberta project could outstrip Syncrude’s ability to process the tar-like bitumen mined from the oil sands into refinery-ready synthetic crude. That would leave it with 115,000 barrels of bitumen a day to sell on the open market by 2020.
Canadian Oil Sands said it plans a series of small projects that will raise production of synthetic crude from Syncrude’s upgraders to 425,000 barrels a day by the end of the decade. It said it has not yet not come up with a cost estimate.
Its goal is to produce 25,000 bpd more than previously expected from the projects. That would be 75,000 bpd above current capacity.
"These expansion plans have the advantage of bringing on production growth with less project execution risk and better economics than constructing greenfield upgrading facilities," Marcel Coutu, Canadian Oil Sands’ chief executive, said in a statement.
The trust is the latest oil company to revisit its plans for the oil sands, the largest crude reserve outside the Middle East.
Most new oil sands projects and expansions were delayed, deferred, or cancelled in the wake of the financial crisis in 2008. But in recent months, BP Plc and Husky Energy Inc, Total SA and others have dusted off plans to increase output. Syncrude plans to begin construction of its Aurora South mine in 2012, building it in two 100,000 barrel per day phases that will be complete in 2016 and 2020.
When the second phase is finished, Syncrude will produce about 600,000 bpd of bitumen, about 115,000 bpd more than needed to supply its upgraders.
Syncrude, which to date has only sold low-sulfur synthetic crude, could also sell sulfur-rich crude and heavy oil into the market to cope with its excess output.
It could also expand its upgrading capacity should prices warrant the move, but said that decision would be made at a later date.
The plans have not yet been approved by Syncrude’s owners, and analysts cautioned that it’s too early to say if the Syncrude consortium will support the expansion.
"Key questions on costs and whether or not all owners (Syncrude requires unanimous approval) will back the project will remain unanswered for some time," Andrew Potter, an analyst at UBS Securities, wrote in a note to clients. "We do not expect investors to place significant value into (Canadian Oil Sands) for these expansions until these questions are answered."
The other Syncrude partners are Imperial Oil Ltd, Suncor Energy Inc, Nexen Inc, ConocoPhillips, Murphy Oil Corp and Nippon Oil Corp unit Mocal Energy.
