[ad_1]
Alberta approved a new project by Grizzly Oil Sands ULC on Thursday that could breathe new life into a company that suspended production on another project in the province because of low oil prices.
The May River project approximately 130 kilometres southeast of Fort McMurray would produce 12,000 barrels a day in a first phase that might be ready by 2023 before eventual output of about 80,000 barrels a day, Grizzly President Serge Bisson said by phone from Calgary.
“Approval like this is extremely material for our company and allows us to move forward with our business,” Bisson said, noting he’s been waiting almost six years for the go-ahead. “We’re very excited about the development opportunity here.”
The Alberta Energy Regulator recommended that the project be approved by cabinet.
“This project is in the best interest of Alberta, and is another example of how we are responsibly developing our resources,” Sonya Savage, Alberta’s Minister of Energy said in a statement. “Moving these projects forward shows that Alberta is open for business, and we are dedicated to encouraging investment in our province.”
Canadian oil producers are struggling as prices for the commodity languish and lack of export pipeline capacity keeps the value of domestic crude lower than the U.S. counterpart benchmark West Texas Intermediate. They are betting that new capacity, such as plans started this week by Trans Mountain Corp. to install pipeline this month in its expansion project to the British Columbia coast, will help cut the price differential.
We’re very excited about the development opportunity here
Grizzly President Serge Bisson
Grizzly will meet with its investors and may have “feedback” on a final investment decision in early 2020, Bisson said. The project would likely cost “north of $200 million,” but he declined to be more specific.
The junior oil producer is three-quarter owned by Greenwich, Conn.-based Wexford Capital LP, an investment advisor with more than $4 billion in assets under management. The remaining quarter is held by Nasdaq-listed Gulfport Energy Corp. of Oklahoma City, Okla.
“We’re going to have the next couple of months to reflect on the market and confirm that egress out of Alberta is in fact on its way to be more positive than it has been,” Bisson said.
Kevin Birn, an analyst at IHS Markit Co., said by e-mail the implications of additional supply from May River would depend on its construction timing, but the bottlenecks are showing some signs of easing up.
“We are seeing some gradual easing of takeaway issues with continued optimization of Canadian pipeline export capacity as well as ongoing building of crude by rail that should enable greater export capacity over 2020,” Birn said.
The positive outlook has Grizzly ready to restart production at its existing Algar Lake project about 60 kilometres southwest of Fort McMurray that was suspended in 2015 because of the low prices, Bisson said. It was geared for peak production of 18,000 barrels a day.
“We were very excited to hear Trans Mountain has kicked off construction,” Bisson said. “We’re moving in the right direction and we’re very optimistic.”
• Email:
[ad_2]
You can read more of the news on source
