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With first oilsands production set to flow, PetroChina¡¯s Canadian unit eyes
Date£º2016/4/18 

TORONTO ¡ª PetroChina, which a few years ago dreamed of quickly becoming one of
Canada¡¯s largest oilsands companies, will take time to learn from its first
steps in the business before expanding further, a senior executive in its
Canadian subsidiary said Wednesday.
 
¡°We are excited about the oilsands, but it doesn¡¯t enjoy a particular strategic
advantage,¡± Bob Shepherd, executive vice-president of Brion Energy, as
PetroChina¡¯s wholly owned Canadian unit is known, said on the sidelines of the
Canadian Association of Petroleum Producers¡¯ investment symposium in Toronto.
 
¡°It¡¯s got to compete with the other opportunities we have,¡± he said. ¡°We have
some lessons to learn before we hit the accelerator on oilsands development. We
are hopeful, but there is still information we have to gather before we make any
commitments about going harder or faster.¡±

PetroChina invested $13 billion in Canada in recent years for footholds in the
oilsands, shale gas and liquefied natural gas.
 
China¡¯s largest oil company entered the oilsands business through a $5-billion
joint venture with Athabasca Oil Corp. on two projects ¡ª MacKay River and Dover.
But Athabasca backed out to focus on other opportunities and forced Brion to
take over full ownership.
 
Brion finished building the first phase of MacKay River, a steam-assisted
gravity drainage project, on its own, but costs were higher than expected and it
took longer. Shepherd would not reveal the final price tag, but it has been
pegged at $2.2 billion, or about $1 billion more than originally envisioned.
 
There were ¡°growing pains for us in terms of managing a major project in Canada,
transitioning from a joint venture, to a wholly owned venture now,¡± he said. ¡°We
have good established internal project management processes, but you have seen
with a number of companies that there are challenges (in the oilsands) and we
will take the learning from this project and we expect to do the next one
better.¡±
 
MacKay River¡¯s first phase is now mechanically complete and steam injection to
mobilize bitumen so it can flow to the surface will start this summer, he said.
 
First oil is expected around the end of the year and eventually ramp up to
35,000 barrels a day. PetroChina already produces about 20,000 barrels of oil
equivalent a day in Canada from its other projects.
 
The company will watch production performance, costs, and the price of oil
before making further oilsands investments, Shepherd said. And that includes
projects it already owns or acquisition of new ones.
 

It¡¯s been a long journey for us.
 
Perceptions in China that state controlled PetroChina overpaid for its oilsands
interests led to a high profile corruption investigation and arrests.
 
¡°It¡¯s been a long journey for us,¡± Shepherd said. ¡°Certainly we had dialogue
back when things began to slow down (due to the oil price downturn) whether to
complete the project. But we were well under way at that point and a decision
was made to complete.¡±
 
Future projects will cut costs by using the services and expertise of other
affiliates, particularly design and conceptual engineering and detailed
engineering, he said. ¡°Not only can they help reduce costs, but they are
familiar with how to do business as a corporation and often assist us in
preparing our documents so they can pass muster with head office.¡±
 
The MacKay River project has the resources to support 150,000 barrels a day. The
Dover project can support 250,000 barrels a day.
 
Any oilsands growth will build first on MacKay River, where Brion already has
infrastructure. Development of Dover could be seven years away, Shepherd said.
 
Speaking at the symposium, Shepherd said PetroChina¡¯s biggest surprise in Canada
was its inability to build pipelines to the West Coast so it could receive the
best price for its oil.
 
¡°We need leadership from government to drive and support major infrastructure
projects,¡± Shepherd said. ¡°An East Coast pipeline is a good thing, but it¡¯s not
enough. The biggest opportunity is to the West and we all want to see that
happen.¡±
 
Financial Post





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