Imperial Oil Ltd. is poised to start sales of crude oil from its $12.9-billion Kearl oil sands project to third parties now that test runs at three refineries in its corporate family revealed no glitches from the new supply, Imperial’s chief executive officer said.
Production of bitumen from the first phase of Kearl began last spring and is now fluctuating between 80,000 barrels a day and the capacity rate of 110,000, CEO Rich Kruger said. The ramp-up has been slower than many market players had expected, and that helped support Canadian heavy crude prices earlier this year.
For the past few weeks, the oil from the northern Alberta development has been processed at Imperial’s Sarnia, Ont., refinery and Exxon Mobil plants in Joliet, Ill., and Baton Rouge, La. Exxon Mobil owns 69.6 per cent of Imperial and the pair are partners in Kearl.
“When you introduce an new crude to a market, the refiners oftentimes are a little bit nervous – what are they getting, what’s its value?” Mr. Kruger said in an interview. “We wanted to introduce these crudes into our refineries first, to see if there were any challenges or bugs working with it, and then start third-party sales.
“We’ve been running it now for the better part of a month or more in those refineries with no particular issues, and now we will start third-party sales here in the fourth quarter.”
Production at Kearl was put on pause Thursday after Imperial put the project into “safe park mode” due to a gas leak on TransCanada Corp.’s Nova pipeline network. This leak prompted a number of oil sands players to slow production because natural gas is needed to power their operations.
Imperial and Exxon Mobil developed the project without an expensive upgrading plant to turn the heavy crude into light-synthetic oil, as is the case at the other oil sands mining projects such as those run by Suncor Energy Inc. and Syncrude Canada Ltd.
Instead, it uses a technology in its three production trains called paraffinic froth treatment that allows the company to send diluted bitumen to straight into the market.
The Kearl oil has arrived at the Imperial and Exxon Mobil refineries facilities in pipelines, and Mr. Kruger noted that the partners have pipeline capacity secured for all of the production from the first phase of Kearl.
The first phase of Kearl suffered a large cost overrun, due partly to extra work required to break down large steel modules after plans to move them along northern U.S. highways on the way to the project site was met with public opposition.
The next phase, which will double production capacity, is expected to be complete in 2015 at a cost of $8.9-billion. Mr. Kruger said the company aims to avoid a repeat of the transport problems by fabricating the equipment in Edmonton rather than South Korea.