5th Dec 2007 14:18
BP PLC05 December 2007 December 5, 2007 BP ENTERS CANADIAN OIL SANDS WITH HUSKY ENERGY Major upgrade planned at US refinery for Canadian oil processing BP announced today that it is moving into the Canadian oil sands by acquiring ahalf-share in the Sunrise field in Alberta, operated by Husky Energy. At thesame time Husky will acquire a half share in BP's Toledo oil refinery in Ohio,US, between them forming an integrated North American oil sands business. Twoindependent 50/50 joint ventures will be formed from the equally valued assetsto own and develop the businesses. "Toledo and Sunrise are excellent assets. BP's move into oil sands is anopportunity to build a strategic, material position and the huge potential ofSunrise is the ideal entry point for BP into Canadian oil sands," said TonyHayward, BP's group chief executive. "In addition this deal will help guaranteea supply of advanced transportation fuels to major North American markets fromToledo which is a flexible and advantaged site." The Sunrise oil sands field is expected to be sanctioned in 2008 with firstproduction of bitumen in 2012, building to 200,000 barrels of oil a day (bpd) bythe end of the next decade with a 40 year production plateau. Sunrise, locatedin the Athabasca oil sands in northeast Alberta will be developed using steamassisted gravity drainage (SAGD), a tested technology which heats the bitumenwithin the reservoir, allowing it to flow to the surface. The bitumen will bepiped to Hardisty, Alberta, from where it will be transported via existingpipeline networks for refining. Sunrise will be operated by Husky as a Canadianoil sands partnership, based in Calgary. Toledo Refinery's crude distillation capacity is currently 155,000 bpd of which60,000 bpd capacity is currently heavy oil. The refinery is located in one ofthe largest energy consumption regions of the US and, subject to necessaryapprovals and permits, will be expanded to process approximately 170,000 bpd ofheavy oil and bitumen by 2015. It will be operated by BP as a US refining LLC. "This transaction completes Husky's Sunrise Oil Sands total integration withrespect to upstream and downstream solutions," said Mr. John C.S. Lau, President& Chief Executive Officer of Husky Energy Inc. "Husky is extremely pleased to bepartnering with BP, a world class global E&P and Refining company." "The upstream and downstream joint ventures announced today will be investingbillions of dollars to expand North American energy supply and enhance NorthAmerican energy security," said Bob Malone, chairman and president of BPAmerica. "The result will be the development of a major new Canadian oil fieldand the modernization and expansion of the Toledo refinery to allow far greateruse of Canadian heavy oil and to increase clean fuels production by as much as600,000 gallons a day." Full regulatory approval of the proposed deal and final commercial agreementsare expected to be completed in 1Q 2008, with a partnership effective date ofJanuary 1, 2008. BP has been advised by BMO Capital Markets. Note to editors • The Sunrise field in the north of Athabasca, NE Alberta, will be developed inthree phases based on SAGD. The field has been fully delineated by the drillingof 650 appraisal wells. Front end engineering is well advanced on Sunrise withcompletion expected in early 2008. Joint investment up to 2012 is estimated ataround US$3bn. Site preparation work, including clearing of the variousdevelopment areas and the rough grading of the central plant site, fieldfacility roads and well pads, is ongoing. The partnership will be responsiblefor sourcing fuel gas and diluents for Sunrise; and delivering product to amarket transfer point at Hardisty where each party will take their respectiveproduction share. • SAGD is a thermal in-situ recovery process using pairs of horizontal wells. Ahorizontal production well is located near the bottom of the reservoir and steamis injected into a second horizontal well placed above it, heating the bitumenand enabling it to flow. The bitumen and condensed steam, under the influence ofgravity, drain to the lower horizontal well and are produced through thewellbore to the surface. • Around 175 billion barrels of Alberta's oil sands are currently thought to becommercially recoverable. These resources are split between oil sands whichrequire mining methods (about 25% of resource), and oil sands which can bedeveloped using adaptations of conventional oilfield technologies (about 75% ofresource). • Toledo Refinery is located in the city of Oregon in northwest Ohio. It is well positioned to receive Canadian crudes for refining and supply into the USmid-west and the neighbouring Canadian markets. It is a heavy sour cokingrefinery and is highly flexible (Nelson complexity index of 11.6), one of thefew complex refineries outside the Gulf Coast region and California. It can takeheavy and medium sour crudes and upgrade them to advanced, cleaner transport andheating fuels such as low sulphur gasoline, ultra low sulphur diesel, aviationfuels, propane, kerosene and asphalt. It produces daily 3.8 million US gallonsof gasoline, 1.1m gals of diesel, 756,000 gals of jet fuels, about 0.5% of UStotal refining capacity. The value of Toledo on the books of BP Products NorthAmerica Inc. as at 30 September 2007 was US$494m. • Joint investment of around US$2.5bn is expected up to 2015 to sustain andreposition the refinery to process increased amounts of heavy crude oil andbitumen. • BP will initially market 100 percent of the refinery products untilcommencement of Sunrise deliveries, when Husky will have the right to market itsshare of the refinery products. • BP operates five wholly-owned refineries in the US, located in Ohio, Indiana,Texas, Washington and California. • BP is one of the world's largest oil and gas companies, serving millions ofcustomers every day in more than 100 countries across six continents. BP'sbusiness activities are in exploration and production; refining and marketing;and its low-carbon BP Alternative Energy division. Through these businesses, BPprovides fuel for transportation, energy for heat and light, retail services,and petrochemicals products. www.bp.com • Husky Energy Inc. is a fully integrated energy company that participates inupstream, midstream and refined products business areas. The Husky Energy groupof companies produce crude oil, natural gas, synthetic crude oil and a range ofderivative products, for North American and international markets. Husky OilOperations Limited (Husky), one of the Husky Energy group of companies, has a100 percent interest in oil sands leases east of Kearl Lake, about 60 kilometresnortheast of Fort McMurray. www.huskyenergy.ca Further media information: Out of hours BP, London +44 (0)207 496 4076 +44 (0)207 496 5129.BP, Calgary +1 (403) 233 1033BP, Toledo +1 (419) 698-6475BP, Chicago +1 630-821-3212 +1 630-640-4231Husky Energy, Calgary +1 (403) 298 6747 - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BP