The existing uncertainty in the global oil market coupled with high-supply costs of mining projects has resulted in the delay of phases three and four of Canada’s Kearl oil sand project, says a GlobalData report.
Titled ‘Canada Kearl Oil Sands Project Panorama – Oil and Gas Upstream Analysis Report‘, the report reveals that the projects valuation at the current oil prices resulted in a negative remaining net present value (NPV). The western Canadian select crude was sold at $35.27 a barrel on an average last year, while the average remaining technical cost during the valuation was estimated to be $35.81 a barrel.
A minimum increase of 25% in oil prices is required for the project to achieve a positive remaining NPV. The future development of the oil sands projects will remain on hold unless the oil market recovers and prices rise.
With recoverable resources of 4.6 billion barrels and favourable geological conditions, the Kearl oil sands project is one of the country’s most significant developments and boasts of the highest quality oil sands deposits in Canada. The project was developed using a paraffinic froth treatment to process the extracted oil sands, thereby eliminating the high costs associated with an on-site upgrader.
The production from the project, located in the Athabasca Oil Sands, was 150,000 barrels of bitumen per day (bbl/d) last year, which doubled to 220,000bbl/d following an expansion.
The GlobalData report concludes that phase three of the project was expected to add 80,000bbl/d to the overall production with a future debottlenecking planned to further increase the yield to 345,000bbl/d and achieve the regulatory capacity. Phase three was planned to come online in 2020, before the market was hit by the global oil crisis.
