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Published: Wednesday, 12/1/2010

BP-Husky OKs $2.5B for project to boost oil volume

Three years after BP PLC and Husky Energy Inc. announced their partnership in the Sunrise Oil Sands Project, about 40 miles northeast of Fort McMurray, Alberta, and the subsequent upgrade of BP's local refinery, work on the project has commenced and the two companies have been given permission by their boards to move forward.

"Following our acquisition efforts, this sanction is a significant step in progressing BP Canada's upstream oil sands portfolio. It is a real demonstration of BP's enthusiasm and interest in Canadian oil sands," said Stephen Willis, BP's vice president of oil sands.

The local project is expected to generate hundreds of construction jobs but not add many jobs at the plant, the company has said.

The $4 billion project in Alberta and metro Toledo had been delayed, first by the worldwide global collapse in 2008, and then by falling energy prices.

Physical activity on the extraction site in Alberta is expected to begin next month, BP said.

"It's finally signed, sealed, and delivered," U.S. Rep. Marcy Kaptur (D., Toledo) said Wednesday.

"There are all kinds of multinational issues involved . . . but because of what happened in the gulf, this had been delayed. The fact that they have now reached agreement in the joint venture is big news for Toledo."

Early this year, BP began its first renovations aimed at the oil sands project, spending $500 million to replace the reformer units at the Oregon facility to improve hydrogen and energy efficiency, process safety, and operating costs at Toledo, a BP spokesman said.

Ultimately, the local refinery will be able to run full-capacity production for the Sunrise project.

The Sunrise field is believed to contain as much as 3.7 billion barrels of usable oil and is one of many such projects on the vast Athabasca Deposit.

Geologists believe Athabasca may hold at least 160 billion barrels of oil trapped as bitumen, or oil sands.

Bitumen that will flow through more than 2,000 miles of pipeline to the BP-Husky refinery will be extracted from the Canadian oil sands using a process called steam-assisted gravity drainage to heat the oil trapped below, freeing it to drain into a lower horizontal pipe through which it is pumped to the surface.

Initially, plans call for about 60,000 barrels per day to be extracted from the oil sands by 2016, expanding to 200,000 barrels per day by 2020, according to Husky. First production of bitumen is expected in 2014.

Long-term drilling and facility development are expected to continue thereafter for four decades or more.

BP-Husky's Toledo refinery has about 600 employees and another 600 contractors working there, a spokesman said.

After the investment is completed, the company said, the refinery will have boosted capacity to 170,000 barrels per day of heavy oil, up from its capacity of 60,000. The plant now has a capacity of 155,000 barrels a day.

Energy officials in the Canadian province said raw bitumen production in Alberta grew 14 percent in 2009 to 1.5 million barrels a day, even as planning for several projects -- including the BP-Husky joint venture -- slowed when oil prices collapsed in 2008.

The Canadian Association of Petroleum Producers estimates that output from the oil sands deposits will double to 3 million barrels a day within 10 years.

Miss Kaptur said the Sunrise production projections would put a sizeable dent in the approximately 9 million barrels of oil that the United States imports each day, half of which come from the long-troubled Middle East.

Though the oil still would be imported, "it's coming from a true democracy that is a neighbor, friend, and ally," she said.

Contact Larry P. Vellequette at lvellequette@theblade.com, or 419-724-6091.



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