CALGARY – A steam plant in Northern Alberta that’s been gathering dust for about eight years will find new life at Cenovus Energy Inc.’s recently approved Grand Rapids oilsands project — a more cost-effective option than building such a facility from scratch.
Cenovus executives said Wednesday that the company recently purchased the equipment from Total E&P Canada at an undisclosed price.
Cenovus knew Total had chosen to exploit its Joslyn oilsands lease using open-pit mining, rather than steam-assisted gravity drainage, or SAGD, technology. That meant Total had no need for the steam plant.
In SAGD — a method used by Cenovus at all of its oilsands operations — steam is pumped deep underground through one well, and the liquefied bitumen is drawn back up the surface through a second pipe.
“They had a plant that was basically mothballed a few years ago and sitting idle and it occurred to us that it could be very well suited to what we wanted to do,” CEO Brian Ferguson said in an interview.
The first phase of Grand Rapids, which received regulatory approval in March, is expected to pump out a relatively small 8,000 to 10,000 barrels of oil equivalent per day — about the capacity of the Joslyn steam plant.
The last time the Joslyn plant would have been operational was around 2006, said Total spokeswoman Saphina Benimadhu. In May of that year, there was a “steam release” that shot “rock projectiles” as far as 300 metres away from the main crater, according to a 2010 report by Alberta’s energy watchdog.
“The Joslyn lease was more favourable to mining and that’s the direction that we pursued,” said Benimadhu. “This is just really a win-win for both Total and Cenovus. They get to use this facility and we don’t need it anymore, clearly.”
The process of moving the steam plant will be somewhat similar to transporting a house from one place to another by truck.
“Basically, what we need to do is to lift it off the existing piles and move it down and relocate it,” Ferguson said.
A new foundation will be set at Grand Rapids in the same configuration as at Joslyn, “not a huge distance” away, and connected by a road network.
Then, Cenovus will “just set (the plant) back down very gently and bolt it back together and hook it up.”
Other Cenovus projects have made use of second-hand equipment, but not quite on this scale.
The company is an old hand at transporting large loads from its module yard near Edmonton to its oilsands operations further north.
“It’s an extension of what we’ve been doing,” said Ferguson. “We haven’t moved this type of steam plant, but we’ve got lots of experience moving lots of big modules and lots of big equipment.”
Cenovus has regulatory approval to eventually produce up to 180,000 barrels of crude at Grand Rapids. The first phase is expected to start up in 2017.
A small pilot project at Grand Rapids has been producing good results, executives said on a conference call to discuss Cenovus’ first-quarter results.
Earlier Wednesday, Cenovus said its oilsands production was up 20 per cent in the first three months of the year and net earnings jumped 44 per cent to $247 million. That amounts to 33 cents per share, compared with $177 million, or 23 cents, in the same quarter in 2013.
The company reported operating earnings, which exclude one-time items, of $378 million, down three per cent from $391 million in the same quarter last year. That amounts to 50 cents per share — beating the average analyst expectation of 48 cents per share, according to estimates compiled by Thomson Reuters.
Combined oilsands production at Foster Creek and Christina Lake in northern Alberta averaged 120,444 barrels per day in the quarter, up from 100,347 barrels per day in the same quarter last year.
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