Royal Dutch Shell PLC has given the green light to a new steam-driven oil sands project, putting the Anglo-Dutch oil major among a handful of companies announcing big northern Alberta energy developments in the last day.
Shell said it is going ahead with the 80,000 barrel a day Carmon Creek project in the Peace River area of Alberta. It did not give a price tag for the project in a news release on Thursday, though a spokesman said it will be in the billions, rather than millions, of dollars.
The company won regulatory approval for the 100-per-cent owned venture in April.
Shell’s announcement came hours after Suncor Energy Inc., Total SA, and Teck Resources Ltd. said they were going ahead with the $13.5-billion Fort Hills oil sands mining project near Fort McMurray, Alta., after years of delay. That project is expected to start producing up to 180,000 barrels a day after 2017.
The energy companies are proceeding with the big-ticket projects despite uncertainty about the approval of major export pipeline proposals such as Keystone XL and Northern Gateway. Congested pipelines have been a big factor driving down the price of Canadian heavy crude compared with international light oil.
Meanwhile, Enbridge Inc. said it will spend $3-billion on two pipelines: one to get oil from Fort Hills to major conduits and the other to move diluent – light hydrocarbons that are mixed with the bitumen to allow it to flow easily – to that project and other operations in northern Alberta.
“Shell’s Peace River oil leases represent a significant development opportunity. Our decision to invest in Carmon Creek has been carefully studied with the goal of designing a project that is competitive from a commercial, technological and environmental perspective,” Lorraine Mitchelmore, Shell’s executive vice-president, heavy oil, said in a statement.
For the startup of the Carmon Creek phase one and two, the company will produce bitumen from 13 pads, or groupings of wells. It is a twist on the steam-assisted gravity drainage project, in which companies inject steam into the oil reservoir to loosen up the tar-like crude so it can be pumped to the surface. Rather than drilling horizontal wells, Shell will use a “vertical steam-drive” process that will mean more wells but better oil recovery, said Fred Wasden, Shell’s manager of in situ development.
The oil will be used at refineries around the continent, Shell said.
The facilities will be powered by co-generation units that will also feed electricity into the Alberta grid, it said.