Imperial Oil approves $2-billion expansion at Cold Lake oilsands project

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An oil worker holds raw oilsands near Fort McMurray, Alta., on July 9, 2008. THE CANADIAN PRESS/Jeff McIntosh

CALGARY - Imperial Oil Ltd. is going ahead with a $2-billion expansion to its Cold Lake oilsands operation in northeastern Alberta, part of a plan to double overall production by the end of the decade.

The project, called Nabiye, will add 40,000 barrels per day of bitumen production after it starts up in late 2014, a 25 per cent boost to Cold Lake's current output, the Calgary-based oil company (TSX:IMO) said Friday.

"I'd call it a key element in our plan to double our production to about 600,000 oil-equivalent barrels by 2020," said Imperial spokesman Pius Rolheiser.

Cold Lake is the largest thermal in-situ oilsands project in the world, and Imperial's (TSX:IMO) biggest producing asset, comprising about half of its daily liquids production.

Cold Lake produced a record average of 160,000 barrels of bitumen per day in 2011, and added $70 million to Imperial's bottom line during that three-month period, helping drive a 26 per cent jump in quarterly profits.

In order to extract bitumen from 400 metres below the surface, Imperial uses a process called cyclic steam stimulation, in which steam is piped underground through a wellbore and left to soak into the reservoir for a while to soften up the sticky bitumen. After that, it's drawn to the surface through the same wellbore.

The Nabiye project has been in the works, off and on, for about a decade.

Imperial filed a regulatory application for a 30,000-barrel-per-day project in 2002, and got approval two years later. But decided to hold off on building it at the time, because there was other work to do at its existing Cold Lake operations.

The company had another look at the project in 2008, and decided to make some changes to its original plan, including a cogeneration power plant, a design plan with fewer well pads and a sulphur recovery facility. The amended application was approved in 2010.

"The project that we're proceeding with now is a different project in some ways than we first proposed and we believe it's a better project, significantly better because of those three amendments that significantly reduce the environmental impact," said Rolheiser.

Once the Nabiye project starts up, Imperial will have developed about 25 per cent of its total lease holdings in the Cold Lake area, so there are a lot of growth opportunities ahead.

"The undeveloped resource at Cold Lake is still very, very significant," said Rolheiser.

Imperial, majority-owned by Houston-based energy heavyweight ExxonMobil Corp. (NYSE:XOM), is in the process of building the $10.9-billion first phase of its massive Kearl oilsands mine, set to come on stream around the end of this year.

Earlier this week, Imperial said the 110,000-barrel-per-day project was around 87 per cent complete.

Despite problems Imperial has encountered transporting enormous loads of equipment from South Korea to northern Alberta via the United States, the company said the project remains on schedule.

Last month, Imperial's board of directors approved an $8.9-billion expansion that will begin producing 110,000 barrels per day by late 2015.

It also holds a 25 per cent interest in the Syncrude mine, the world's largest oilsands project, as well as running a chain of Esso-branded fuel stations across the country and refineries in Alberta and Ontario.

Imperial shares rose 24 cents to $47.24 in late-morning trading on the Toronto Stock Exchange.