Japan Petroleum Exploration (JAPEX) announced on Friday its final decision to invest USD 1.01 billion on the Hangingstone oil sands project in Alberta, Canada.
Subsidiary Japan Canada Oil Sands (JACOS) currently produces 6,000 to 7,000 B/D of bitumen at the Hangingstone demonstration project area. For the full-scale project, the joint venture between operator JACOS (75%) and Nexen (25%) will develop an area next to the existing demonstration project. Last month, front-end engineering design was completed and scheme approval from the Alberta provincial government was received. The targeted date of production startup is in the first half of 2016.
The initial stage of development is expected to result in a bitumen production capacity of about 20,000 B/D. A decision to further expand the facilities to a capacity of about 30,000 B/D will be made after initial production begins. Production will go on for about 30 years using steam assisted gravity drainage, which has been applied at the demonstration project for more than 10 years.
The bitumen produced at the project with be diluted by ultra-light crude such as condensate and sold through pipelines mainly to US refineries as the diluted bitumen equivalent to heavy crude.
Of the USD 1.01 billion expected total cost for the initial development, JACOS will cover 75%.
“JAPEX’s decision to invest in Hangingstone will be much welcomed at a time when the economics of Canadian oil sands projects are being challenged by low crude prices in the North American market and competition from higher quality US crudes,” said Shun Ling Yap, an analyst at Business Monitor International. “We expect that capital-rich Asian companies eager for fossil fuels will drive investment in expensive oil sands developments as western companies are likely to turn their attention to lighter and sweeter liquids in Canada’s emerging shale plays. However, the returns these Asian firms can make from oil sands project will be conditional on the easing of Canada’s infrastructure bottlenecks, which are currently limiting its export capacity to the energy-hungry Asia on the other side of the Pacific.”