april 2009 issue
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Doing Business
Merger Envisions Energy Giant
BY NORDAHL FLAKSTAD
Freelance Writer
If successful, Suncor’s blockbuster bid to merge with Petro-Canada will create Canada’s largest energy player. Confirmation of the proposed $18.4-billion deal, which came after news of it leaked, helped trigger a five-week high on the Dow Jones Industrial Average on March 23.
The two players say the merger would protect the Canadian oilpatch from foreign buyouts. It would mean an estimated annual savings in operational spending of $300 million, while putting under one company a resource base of 7.5 billion barrels of oil equivalent. The resource estimate is made up of proved developed and undeveloped reserves, as well as probable reserves.
In a Suncor news release, Rick George, Suncor president and CEO, said: “The combined portfolio boasts the largest oilsands resource position, a strong Canadian downstream brand, solid conventional exploration and production assets, and low-cost production from Canada’s East Coast and internationally.”
Mr. George added: “More than just the strategic fit, I also believe there’s a lot of common ground in our corporate vision. Both Petro-Canada and Suncor have a history of innovation and pushing the frontiers of oil-and-gas development in Canada.
“Just as importantly, both companies have taken a leadership position in striving to develop not just resources but also communities, the Canadian economy and our quality of life. We’ve both put a strong focus on people and our shared environment, and together I expect that focus to be even stronger as we move forward.”
Incentives Created To
Stimulate Energy Sector
The Government of Alberta has announced a three-point incentive program to stimulate the province’s energy sector during the economic slowdown.
The plan includes
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A drilling royalty credit for new conventional oil and natural gas wells. This one-year program will provide companies a royalty credit of $200 per metre, using a sliding scale based on their production levels from last year.
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An incentive program for new wells, offering a maximum five per cent
royalty rate for the first year of production from new oil and gas wells. -
A $30-million fund to encourage reclamation of inactive oil and gas wells.
Province Lays Out Oilsands Plan
A 20-year strategic plan announced by the province seeks to optimize economic growth in the oilsands while reducing the environmental footprint there and improving quality of life. Measures in Responsible Actions: A Plan for Alberta’s Oil Sands include
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revising the current environmental impact assessment process to support management of cumulative effects
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increasing the pace of reclamation
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leveraging bitumen royalties to develop value-added oilsands products.
ERCB Toughens Rules
For Oilsands Tailings
Alberta’s Energy Resources Conservation Board has issued new industry-wide criteria for managing oilsands tailings, including specific enforcement actions to be taken when tailings performance targets aren’t met. Companies that do not comply with the new regulations may be forced to close all or parts of their oilsands operations.
The directive requires operators to
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prepare tailings plans and report on tailings ponds annually
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reduce the accumulation of fluid tailings by capturing fine tailings and placing them in a trafficable deposit
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specify dates for construction, use and closure of fluid tailings ponds deposits, and file them with the ERCB by Sept. 30.
Kearl Among Projects
Targeted For More Spending
In a move running counter to those of several industry counterparts, Imperial Oil Ltd. has approved plans to increase its capital and exploration program for 2009. Spending will be $2.2 billion, up from $1.4 billion in 2008. The program includes added funding for major upstream projects, notably the Kearl oilsands project. By the end of 2008, Imperial had spent about $500 million on Kearl.
Think Tank Serves Up
Sobering Stats on Oilsands
A study prepared by the Canadian Energy Research Institute offers a much less sanguine oilsands outlook than one the same Calgary-based think tank offered last year.
Authored by CERI senior economist David McColl, The Eye Of The Beholder: Oil Sands Calamity Or Golden Opportunity? suggests there will be no growth in oilsands production before the end of next year. Based on its 2009 Economic Slowdown Projection, CERI suggests that, in the absence of some form of government support, $218 billion will be invested in the oilsands for new production by 2020.
This is $97 billion less than projected last year under CERI’s medium-growth forecast. It is also, as CERI puts it, a “shocking” $241 billion less than the think tank’s unconstrained or high-investment scenario also offered a year ago.
The medium forecast suggested 3.4 million bbl/d of bitumen production by 2015 from 1.2 million now. However, for 2015, the total production band forecast now is 1.9 to 2.9 million bbl/d, growing to 3.7 to 5.4 million bbl/d by 2030.
Authorities Target Water Savings Potential in the Oilsands
Authorities are seeking stakeholder feedback on a proposal that could yield savings of 220.5 million barrels of fresh water over the next 10 years. A joint approach from Alberta’s Energy Resources Conservation Board and Alberta Environment, the draft directive contains new requirements on measurement, reporting and use of water in thermal in-situ oilsands operations.
The draft targets a 30 per cent improvement in water efficiency and productivity by 2015, using a 2005 baseline. This stems from the province’s Water for Life: Alberta’s Strategy for Sustainability, which the government unveiled in 2003.
The recent water-use initiative on thermal in-situ oilsands follows another ERCB directive issued earlier this year on new criteria for managing oilsands tailings.
Aecon Group Buys
Lockerbie & Hole
Edmonton-based Lockerbie & Hole Inc., a contracting and engineering firm whose Alberta roots go back more than a century, is being acquired for $220 million by the Aecon Group Inc. Headquartered in Toronto, Aecon is Canada’s largest publicly traded construction and infrastructure development company.
The combined company will employ about 9,000 people during peak construction, including about 1,500 full-time salaried employees and 7,500 hourly employees (5,000 from Aecon, 2,500 Lockerbie).
Lockerbie was founded in 1898 and is one of the largest mechanical construction contractors in Canada. The multi-disciplined contractor provides mechanical, electrical, instrumentation, pipe fabrication, module assembly, boiler erection, insulation and civil construction services primarily to the oilsands, mining, institutional, municipal and commercial market sectors.
At least for its commercial mechanical business, Lockerbie & Hole is expected to retain its name.
KMC/PCL to Build
Edmonton Interchange
KMC/PCL, a Joint Venture, has been awarded a $168.6-million contract for the design/build of the Stony Plain Road interchange on the southwest portion of Edmonton’s Anthony Henday Drive ring road. The full-systems interchange, with free flow in all directions, will include seven bridges.
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RINGING TRUE |
Two other APEGGA permit holders submitted earlier bids to qualify. They were unsuccessful with final bids of $183.3 million and $220 million.
Along with other Edmonton ring road projects, the federal government has identified the interchange as a funding priority and set aside up to $100 million to partner with Alberta. The Stony Plain interchange is expected to open by fall 2011, and planning continues on the other southwest Anthony Henday interchanges.
KMC/PCL will be project lead on the Stony Plain Road project and carry out construction. Design preparation is in the hands of CH2M HILL Canada Ltd., which is also part of the consortium.
Province Eyes Designating Land
For Major Infrastructure
A proposed new law would let the province designate land for major infrastructure projects. Bill 19, the Land Assembly Project Area Act, would also regulate future development within an approved project area, with the understanding that the province ultimately will purchase the land.
The new legislation seeks to improve how the Government of Alberta identifies and sets aside land for large infrastructure projects involving transportation, utilities and water management.
Alberta Government
Seeks Qualifications
For Stoney Trail Bid
Alberta Transportation will use a public-private partnership to extend Stoney Trail from 17th Avenue S.E. to the east side of the existing Macleod Trail interchange in Calgary. Once a contractor is selected, construction would begin in spring 2010 and finish by fall 2013.
The project involves 25 kilometres of six-lane roadway, nine interchanges, two flyover railway crossings and 29 bridges. The main line of the road will be free-flow and have no traffic lights.
CNRL Begins
Horizon Production
Canadian Natural Resources Ltd. has announced the first synthetic crude oil production at its Horizon oilsands facility, 75 km north of Fort McMurray. Phase 1 will see Horizon produce 110,000 bbl/d of synthetic crude oil.
Meanwhile, CNRL has responded to recent resource prices by deferring a portion of its 2009 capital program worth $800 million.
TransCanada’s Alberta System
To Fall Under NEB
TransCanada PipeLines Ltd.’s Alberta System is already part of an extensive pipeline under federal jurisdiction. Therefore, the company will be allowed to operate it under the National Energy Board Act, the National Energy Board has ruled.
The system has over 23,500 km of pipeline and associated facilities, all within Alberta. These will be added to the 48,000 km that the NEB already regulates across Canada. Until now, Alberta’s Energy Resources Conservation Board had regulated the Alberta system, a legacy of the former NOVA pipeline system sold to TransCanada.
TransCanada expects to apply to the NEB to extend the Alberta System into northeastern B.C. to provide integrated service to Horn River and Montney shale-gas shippers.
SolTech Projects To Work With U of C On Air Capture of CO2
A system of capturing carbon dioxide in ambient air is in the works. SolTech Projects Inc. of Calgary has announced it will work on technology employing so-called air capture of C02 with Dr. David Keith, director of the University of Calgary’s Institute for Sustainable Energy, Environment and Economy.
Unlike capture from a point source, such as an exhaust gas flue stack, air capture will remove the gas from ambient air. This would allow systems to be set-up at independent sites, providing a way to capture C02 from widespread and mobile sources, such as automobiles and aircraft.
SolTech will help with some of the equipment costing and preliminary design work.
Wiebe Environmental
Joins GENIVAR Fold
The GENIVAR Income Fund has acquired Wiebe Environmental Services Inc., which has 40 employees in Calgary, Edmonton and Grande Prairie. GENIVAR has more than 550 employees in Western Canada, including 310 in Alberta.
Founded in 1994, WES provides extensive environmental management services, including design and liability assessments, well-site reclamation and spill remediation. GENIVAR controls one of Canada’s largest engineering services firms and, with a staff of 3,500, has more than 85 offices in Canada and internationally.
“We will now be able to offer an expanded range of services in all areas of engineering and the oil and gas sector,” said Brian Oshust, P.Eng., GENIVAR’s vice-president,
Alberta.
Tolko Shuts Down
Slave Lake Plant
Subject to improved market conditions for wood products, Tolko Industries Ltd. is closing its $200-million engineering wood plant at Slave Lake. Opened in November 2007, the plant maintained a 112-person workforce producing oriented-strand board and laminated-strand lumber.
De Beers Lays Off
Snap Lake Workers
In downsizing its Snap Lake, N.W.T., diamond-mining operation, De Beers Canada is laying off nearly a quarter of the underground mine’s employees. All told, 128 workers of 550 are being laid off.
Some of the contractors at the mine, located 220 km northeast of Yellowknife, were also indefinitely suspended or have had their work scopes significantly reduced. This means job losses for another 90 contract employees.
Some of the positions filled by contractors will be absorbed by De Beers’ employees in the newly restructured organization.
McCoy Corp. Buys Texas Firm
McCoy Corp. of Edmonton has bought RP Manufacturing & Calibration of Conroe, Tex. RP is the second largest global supplier of make/break machines used for assembling oil and gas well downhole tool strings and testing pipe connections.
McCoy manufactures tubular make-up power tongs, for land and offshore rig applications, as well as dies and inserts used in rig equipment. In addition, the company builds mobile products, including vacuum tanks, hydrovac systems, pick-up and lay-down machines and heavy-duty trailers and chassis. McCoy also provides a range of related service support.
Zargon Purchases
Masters Energy
Zargon Energy Trust has bought all outstanding common shares of Masters Energy Inc. for about $41.4 million.
Masters currently produces about 1,275 b.o.e./d. Some 55 per cent of this comes from the Little Bow oil property in Southern Alberta.
The Alberta plains and west central areas form the base for Zargon’s natural gas exploration and development businesses. Williston Basin is the foundation of its oil exploitation business.
Hatch Mott MacDonald Involved With Wind And C-Train Projects
Nexen Inc. has retained the Calgary office of Hatch Mott MacDonald Ltd. to provide front-end engineering for the Hand Hills wind power project near Drumheller.
The package includes the preliminary layout of road and collection
systems, geotechnical study, a design basis memorandum, a project execution plan, balance-of-plant estimates for two turbine layouts, and assistance
with turbine selection and bid evaluation. Construction is scheduled to begin in 2010.
In another development involving Hatch Mott MacDonald, Calgary City Council has approved the firm’s recommendations for extending the city’s C-Train system westward by eight kilometres. As project manager, the company will issue a request for proposal this year, aimed at 2012 completion.
EPCOR Picks Stantec
For Interior Design
EPCOR Utilities Inc. has chosen Stantec to supply interior design services for its office space in the new EPCOR Tower under construction in downtown Edmonton. Stantec will provide space planning and design, as well as select finishes and furniture with EPCOR and the project architect, Kasian Architecture Interior Design and Planning Ltd.
Construction of the 28-storey tower is expected to reach ground level by April. The 625,000-square-foot building will be the first phase of Qualico’s Station Lands development. EPCOR will be the tower’s principal tenant and occupy about 45 per cent the building.
The tower will be built to meet a LEED silver or higher standard. LEED is the trademarked Leadership in Energy and Environmental Design program.
Grande Cache Coal
Announces Layoffs
Grande Cache Coal Corp. is reducing production by 25 per cent and laying off 100 of 350 employees at its Grande Cache mining operations in west-central Alberta. Slowdown in demand for metallurgical coal has also prompted delay in delivery of $48 million in equipment.
SPAR Aerospace
Bids Edmonton Adieu
After 40 years, SPAR Aerospace Ltd. is winding down its aircraft repair and refurbishing business at Edmonton International Airport, putting 180 people out of work.
The Edmonton operation of SPAR, which since 2002 has been a subsidiary of L-3 Communications Corp. of New York, is known internationally for its expertise in renewing aging Hercules transport aircraft. Although SPAR continued to obtain international contracts for C-130 renewals, in recent years it lost out on bids to renew Hercules maintenance contracts for the Canadian Forces.
Federal Funds In the Wind
For Canadian Hydro Developers
Canadian Hydro Developers Inc. of Calgary will receive $59 million in federal funding over the next decade for the company’s $450-million Wolfe Island wind project. Ottawa has committed $5.9 million annually toward construction of 86, 2.3-megawatt wind turbines near Kingston, Ont.
Husky and BP
Recommit To Sunrise
Lower material and labour costs seem to be behind an announcement that Husky Energy Inc. and BP are recommitting to the Sunrise oilsands project. Husky CEO John Lau said a final decision on Sunrise would be made in mid-2010.
Mr. Lau noted that costs of the project, which could produce oil as early as 2012, have decreased 40 per cent.
Located 60 km northeast of Fort McMurray, Sunrise will be Husky’s second oilsands project. It is an integrated joint development with BP, which will provide refining capacity in Toledo, Ohio.
Regulatory approval was obtained in December 2005 for phased development of a 200,000 bbl/d project using technology employing steam-assisted gravity drainage.
Fewer Wells Forecast —
Except in B.C.
The Petroleum Services Association of Canada forecasts a 2009 slowdown in drilling more severe than the one it predicted in November. PSAC foresees 13,500 wells across Canada, a 21 per cent decrease from actual total wells drilled of 17,043 in 2008.
Provincially, PSAC estimates 8,455 wells will be drilled in Alberta, a 27 per cent decrease from 2008.
Both Saskatchewan and Manitoba will also experience drops, of five per cent to 3,805 wells and 13 per cent to 250 wells.
The good news appears to be farther west. British Columbia will see a seven per cent increase to 905 wells, the association forecasts.
Syncrude Faces Charges
Over Waterfowl Deaths
Following the death of waterfowl on its Aurora North Mine tailings pond last year, Syncrude Ltd. is facing federal and provincial charges that could lead to fines of up to $800,000 and possible jailing of company executives. Charges are being laid under the Alberta Environmental Protection and Enhancement Act and the federal Migratory Birds Convention Act.
In another development, the ERCB has been asked to approve raising by 10 metres a dike in order to deepen the tailings pond at Syncrude’s north site. The company describes it as a temporary measure related to plans to convert its southwest sand storage site into an active tailings pond. Syncrude intends to pipe tailings water from there into the North Mine once it is mined out in 2014.
Edmonton LRT Extension
Less Costly Than Expected
Requirement for less right-of-way land is expected to reduce by $70 million the costs of a northwest extension of the City of Edmonton’s light rail transit system. Land costs for the line, which will link downtown with the Northern Alberta Institute of Technology campus, originally were placed at $150 million.
The project’s expected total cost is $800 million.
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