(EnergyAsia, December 27 2012, Thursday) — After decades of relative inaction in Canada’s oil-rich Alberta province, Japan Petroleum Exploration Co (Japex) said it plans to invest C$1.1-billion to boost production at its jointly-owned Hangingstone field from about 6,000 to 7,000 b/d to 30,000 b/d from 2016. (US$1=C$0.99).
Japan’s second largest upstream company said subsidiary Japan Canada Oil Sands Ltd (JACOS), which owns a 75% stake in the project, plans to export the increased production to refineries in the US which have the capability to process the heavy crude created from mixing Alberta’s bitumen with ultra-light crude oil and condensate.
Partner Nexen Inc, which holds the remaining 25%, is due to make a decision on its C$300-million share of the investment by the first quarter of 2013. The Calgary-based firm, which has just been acquired by China’s CNOOC Ltd in a massive C$15 billion deal, is expected to greenlight the project as it has just approved the design and execution plan for Hangingstone’s expansion. It is believed that Japex had previously been unable to implement the project as cash-strapped Nexen did not have the funds to go along with the proposed expansion.
Having completed the front-end engineering design and obtained approval from the Alberta provincial government in November, Japex said the partners have started full-scale development work with the aim of raising production in the first half of 2016.
Due to investment timing and technical risks, Japex said the partners will adopt a staged approach with an initial capacity to produce 20,000 b/d of bitumen that could be scaled up to 30,000 b/d. Based on the proven steam-assisted gravity drainage (SAGD) technology that has been in use at Hangingstone since 1999, the plant is expected to have a production life of around 30 years.
According to Japex, JACOS was established in 1978 as a joint investment between Japan National Oil Corporation (JNOC) and 62 Japanese companies. JACOS, PetroCanada and two other Canadian companies jointly started pilot tests for the commercial production of oilsands as a national project.
Japex said oilsands production and trade could become one of its core businesses, with Hangingstone’s success paving the way for its expansion into other leases in the province, leading to oil exports to Asia.
Having approved CNOOC’s unpopular wholesale takeover of Nexen, the Canadian government is looking to Japanese companies, which are not government owned, to provide a counter-balance to China’s growing interest and stake in its massive oil reserves, which according to BP is the world’s fourth largest after Venezuela, Saudi Arabia and Iraq.
In announcing his decision on December 7 to allow CNOOC and Malaysia’s Petronas to take over Canadian oil firms, Prime Minister Stephen Harper said his government would make it difficult for state-owned foreign enterprises to make similar future acquisitions.