Imperial Oil’s $10.9B Kearl project on track
The first phase of Imperial Oil’s massive Kearl oil sands project is about 68% complete and is on schedule despite difficulty getting massive pieces of equipment to the site near Fort McMurray, Alta.
CALGARY: The first phase of Imperial Oil Ltd.’s massive Kearl oil sands project is about 68% complete and remains on schedule despite difficulty getting massive pieces of equipment to the construction site near Fort McMurray, Alta.
The Calgary-based oil producer said the 110,000-barrel-per-day mine in on track to start up in late 2012.
Imperial, majority owned by Texas-based energy heavyweight ExxonMobil Corp., said in May the price tag for the first phase is expected to be $10.9 billion, a substantial increase from its earlier estimate of $8 billion.
It aims to build the mine in two phases, with a project in between to unlock spare capacity from the first phase. The price increase reflects the fact that Imperial is investing in equipment now so it won’t have to do so later.
The amount of oil that Kearl will eventually be able to produce is unchanged, as are the expected costs for the entire 345,000 barrel per day development.
Imperial has ordered huge pieces of equipment for Kearl from a company in South Korea, and those modules have travelled across the Pacific ocean and along rivers to the inland port of Lewiston, Idaho.
But Imperial now is facing court challenges in getting the enormous loads through Idaho and Montana, where they were to travel along secondary highways by truck to northern Alberta.
“We are evaluating the recent Montana court decision barring any permits for transport of modules on Highway 12 and are encouraged by the Idaho hearing officer’s findings in the contested case proceedings that confirmed preparations for safe module transport on the Idaho portion of Highway 12,’’ Imperial said in a statement.
Imperial is nearly finished breaking up the modules into smaller pieces at Lewiston so they are can travel along interstate highways. Those smaller loads began moving in mid-July.
“It looks like they’re still on track. We’ve still got another roughly 18 months before this project begins production. A lot can happen in 18 months,’’ said Lanny Pendill, an analyst with Edward Jones in St. Louis.
“But I would say they understand the impact from the recent regulatory delays that they’ve encountered and, to the extent that they’re coming back out and maintaining that start date, we’re going to stick with that at least at this point.’’
Imperial also reports its second-quarter profits were $726 million, a 40% jump from $517 million a year earlier. Revenues increased to $7.7 billion from $6.1 billion a year earlier as the company benefited from higher world oil prices.
Bruce March, chairman, president and chief executive, said Imperial owed the sharp increase to strength in the production side of its business.
“The upstream business was the primary contributor to this increase, with strong earnings driven in part by higher production from our Cold Lake operations, which set another production record in the quarter,” March.
The Cold Lake oil sands output averaged 158,000 barrels per day. During the same period a year ago, 140,000 barrels were produced from the enormous steam-driven oil sands project.
In addition to Kearl and Cold Lake, Imperial’s presence in the oil sands includes a 25% interest in the Syncrude Canada Ltd. mine, the largest project of its kind in the world.
© 2011 The Canadian Press