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Bruce March, president and CEO of Imperial Oil, addresses the company's annual meeting in Calgary, Thursday, April 28, 2011.

Imperial Oil Ltd. has approved plans to spend $2-billion on an oil sands expansion effort, just days after turning over record production results from the existing project.

The company plans to expand its Cold Lake operation, proceeding with its Nabiye blueprints. Operations at the new zone, which will be developed using a drilling technique rather than a strip mine, are expected to start by the end of 2014.

Imperial's decision adds to the extensive line up of expansion projects scheduled for Alberta's northern oil reserves. The wave of spending will create thousands of jobs, but even though energy companies have pledged to keep cost inflation under wraps by co-operating on pacing and striking long-term contracts with suppliers, the market is weary of climbing expenses amid the growth frenzy.

Imperial is among the big spenders, with the first phase of its $30-billion Kearl oil sands mine nearing production. Suncor Energy Inc. serves as another example as it expands its Firebag project and intends to make a major decision regarding the Fort Hills mine in 2013. France's Total SA, along Suncor and other partners, received regulatory approval for the Joslyn North mine in December – another project where the owners will have to spend billions. Cenovus Energy Inc. and Husky Energy Inc. are also among those in the queue.

The growing list also attracts environmental critics. Nabiye, which will produce about 40,000 barrels of bitumen per day, is an in-situ project, which dodges the problem of hosting an ugly mine, but comes with concerns over carbon dioxide emissions.

Imperial plans to use a relatively new technology, dubbed cyclic steam stimulation (CSS), at the site. Bitumen is extracted using one well, where steam is injected, paused while the resource below softens, and then the thick goo flows up the same wellbore. (Most in-situ projects use two wellheads). Pius Rolheiser, a spokesman for the company, said this system will reduce Imperial's so-called footprint in the forest at Nabiye.

"One of the [regulatory]amendments we sought for and gained was to change our field pad layout [so]we reduce the number of surface pads by 40 per cent," he said. "And that's purely as a result as of advances in horizontal drilling technology."

Exxon Mobil Corp., which owns the majority of Imperial, says this steam injection process can reduce CO2 emissions by 10 per cent. It issued its first license to Baker Hughes this week, noting the process reduces steam consumption. It is used in horizontal wells, rather than their vertical counterparts.

All of the Cold Lake facility uses CSS, and the same will apply to Nabiye, Mr. Rolheiser said. The expansion will include a new steam generation plant and bitumen-processing facility. Cold Lake, Imperial said, is the largest and oldest in-situ oil sands project in Canada, with extensive steam and processing facilities in place. Cold Lake produced an average of 160,000 barrels of bitumen per day in 2011, and reached 162,000 barrels per day in the fourth quarter.

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