Canada: FMC’s Overview Of Significant Developments In The Canadian Energy Industry, October 2006

Article by Doug Black, Bill Gilliland, Nick Kangles, Alex MacWilliam, Karim Mahmud, Miles Pittman, Rich Miller, John Hurley, Roxanna Benoit, Jerry Farrell & Ron Stuber

Alberta Oil Sands

EnCana and ConocoPhillips announced that they have agreed to a 50-50 upstream/downstream partnership. EnCana will contribute 100% of its Foster Creek and Christina Lake in situ oil sands projects while ConocoPhillips will contribute 100% of its Wood River refinery in Roxana, Illinois and its Borger refinery in Borger, Texas. The partnership is effective as of January 2, 2007 with each company committing to spend $8.5 billion on the projects over the next 10 years. It is estimated that the oil sands assets hold more than 6.5 bbbl of recoverable bitumen. The partnership's goal is to increase production from the current 50,000 bpd to 400,000 bpd of bitumen by 2015.(Please see number 1 on map)

Husky announced the official opening of its Tucker oil sands project near Cold Lake, Alberta. The project, the first in Husky's portfolio in oil sands assets, was completed on time and below its $500 million budget. Husky expects to produce 350 mmbbl of bitumen over the 35 year life of the project. First oil is expected in November of this year with peak production to reach more than 30,000 bpd of bitumen within 18 to 24 months.(Please see number 1 on map)

Synenco Energy, managing partner of the Northern Lights Partnership, has filed an application with the Alberta Energy and Utilities Board and Alberta Environment to construct and operate the Northern Lights Upgrader in Sturgeon County, Alberta. The upgrader will be designed to produce a higher quality synthetic crude oil at a forecasted capacity of 100,000 bpd of synthetic crude oil, with 50,000 bpd of production being targeted for late 2010.(Please see number 1 on map)

Shell Canada, Western Oil Sands and Chevron Canada have elected to to move forward with Expansion 1 of the Athabasca Oil Sands Project, which will expand oil sands mining and upgrading facilities by 100,000 bpd of bitumen. The Athabasca Oil Sands Project is a surface mining operation currently producing about 155,000 bpd of bitumen. This expansion is expected to be completed by 2010 at an estimated cost of $14.5 billion (U.S.).(Please see number 2 on map)

On October 31, 2006 Canada's federal government announced a proposal to change existing tax law related to publicly traded trusts and limited partnerships to effectively tax most of these investment vehicles in the same manner as corporations. If enacted as proposed, existing public trusts and limited partnerships would be subject to taxation beginning in 2011, while new public trusts and limited partnerships would be subject to the tax immediately.(Please see number 2 on map)

EnCana has opened its Steeprock Gas Plant near Kelly Lake, British Columbia. It is the largest gas processing plant to be built in British Columbia in the past decade, and will enable EnCana to process the growing volumes of natural gas being produced in north-eastern BC. The plant has the capacity to process of 198 mmcfpd of natural gas.(Please see number 3 on map)

Flash Point Facilitators has proposed a project to supply fuel for mining projects in the Arctic at a lower cost than current methods. The $450 million project would include 2,600 to 3,000 kilometres of flexible 6 or 7 inch pipe. The first phase of the project would include a pipeline from the end of the Ingraham Trail to the Lac de Gras area that would supply up to 250 million litres of liquid petroleum products annually. The second phase would see the construction of a natural gas pipe line of the same size and material, immediately parallel to the liquid petroleum line, and extending to the North American natural gas pipeline grid in Northern Alberta. Phase three would extend the liquids line from its southern end on the Ingraham Trail to the railway head at Enterprise. The project would ease the uncertainty of petroleum supply to large northern mining operations and reduce truck traffic on unreliable northern ice roads.(Please see number 4 on map)

Irving Oil is considering building a $5 to $7 billion dollar refinery in Saint John, New Brunswick, a project that could supply 300,000 bpd of refined products to the north-eastern United States. The company expects to decide whether to proceed with a permit application by early 2007. The project would be the first major refinery built in North America in almost 25 years, and would be the largest ever private-sector investment in Atlantic Canada. Irving currently operates Canada's largest refinery in Saint John, which has also reached production rates exceeding 300,000 bpd.(Please see number 5 on map)

Corridor Resources has announced that the New Brunswick Board of Commissioners of Public Utilities has approved its application for a permit to construct pipelines and related facilities from the McCully natural gas field to connect with the Maritimes & Northeast Pipeline. Corridor will commence construction as soon as possible, and anticipates that initial production from Phase 2 developments of the field will commence in February, 2007 and production will reach the design capacity of 30 mmcfpd early in the spring of 2007.(Please see number 5 on map)

Harvest Energy Trust has closed its $1.6 billion acquisition of North Atlantic Refining from Vitol Refining Group B.V. Harvest indicated that the refinery will continue to produce gasoline and ultra-low sulphur diesel products, and will be the subject of up to $700 million in growth projects. Harvest has entered into a supply and off-take agreement with Vitol whereby Vitol will continue to supply the crude oil feedstock for the North Atlantic Refinery and will purchase its refined products for sale outside Newfoundland for a minimum of two years.(Please see number 6 on map)

The Alberta government has introduced its Incremental Ethane Extraction Policy to bring more ethane feedstock to the petrochemical industry and expand opportunities for value-added upgrading. The Policy is designed to support investments in infrastructure and encourage diversification of Alberta's energy industry and is focused on supporting increased short-term ethane extraction through the provision of consumption credits to petrochemical facilities based upon the incremental ethane they use, up to a maximum of the royalties collected ($35 million) on extracted ethane.

Fort Chicago Energy Partners and Pristine Power have been awarded a combined heat and power contract under a Request for Proposal recently issued by the Ontario Power Authority. Fort Chicago and Pristine, through East Windsor Cogeneration LP, will provide power for a 20 year period upon the commencement of commercial operations. The cogeneration plant located in Windsor, Ontario will produce 84 megawatts of electricity per year from two gas turbine generators and boiler facilities. Total capital costs are anticipated to be approximately $160 million plus financing costs, and it is expected that commercial operations will commence in the first quarter of 2009.(Please see number 7 on map)

Nexen and GW Power Corporation have opened the $113 million Soderglen wind farm southwest of Fort Macleod, Alberta. At full capacity, the 70.5 megawatt project will produce enough electricity to power 25,000 homes and produce enough clean energy to offset 95,000 tonnes of carbon dioxide equivalent per year. The federal government will invest more than $20 million over 10 years in the project through the Wind Power Production Incentive.(Please see number 8 on map)