Imperial Oil Ltd. has approved a final investment decision to proceed with its $2.6-billion Aspen oil sands project in Alberta.
Construction will begin in the fourth quarter of this year. Imperial says Aspen will eventually produce 75,000 barrels of bitumen per day, with first output anticipated in 2022.
Imperial touted technology that will be used at the project, saying in a release an "advanced solvent-assisted, steam-assisted gravity drainage" system will slash emissions intensity and Aspen's water usage by as much as 25 per cent.
Rich Kruger, Imperial Oil's chairman, president and chief executive, said in an interview with BNN Bloomberg that Aspen’s technology will help the Calgary-based producer compete in today’s low-price environment.
“We want to make sure we’re globally competitive for a capital investment. For us that would mean a double digit return in a US$40 per barrel world,” Kruger said.
“And it’s the technology that allows us to lower that break-even cost and achieve an economic outlook that is better than most any oil sands project. We want to be resilient in a low price world.”
Aspen would be the biggest brand new oil sands project to be sanctioned since global crude prices collapsed in 2014 from more than US$100 a barrel. The decision is a vote of confidence in Canada’s oil patch at a time when pipeline bottlenecks and delays in building new export lines widen the gap between local heavy-crude prices and global benchmarks.
The decision to go ahead with Aspen contrasts with moves by international majors such as Royal Dutch Shell Plc, ConocoPhillips and Total SA, which sold Canadian assets and reduced their exposure to the oil sands during the downturn.
Imperial said approximately 700 jobs will be created to support construction of Aspen. The company estimates the project will generate roughly $4 billion in federal and provincial tax revenue over its 30-year lifespan.
Kruger, who has previously raised concerns about Canadian competitiveness and regulatory uncertainty in the energy sector, added that about one-quarter of the 400,000 barrels of bitumen it produces per day is moved through a rail terminal adjacent to Imperial’s Edmonton refinery. In the coming quarters, Imperial plans to increase its use of rail to help it transport bitumen to the U.S. Gulf Coast, Kruger said.
“Five years ago, we looked at our growth plans and uncertainty in the industry, and we took out what we referred to as an insurance policy by investing in a rail terminal adjacent to our Edmonton refinery,” Kruger said.
“At that point in time we weren’t sure we would use it – like any good insurance policy – but if you need it, you’re glad you have it. Today I’m glad we took out that insurance policy.”
With files from Bloomberg
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