As an area of significant future oil production growth, ConocoPhillips (COP) has been increasingly favoring its oil sands projects. The company will start the initial construction of the second phase of the Surmont project this year, reports oilvoice.com. It is a Canadian oil sands steam-assisted gravity drainage (SAGD) facility. Surmont is a 50/50 joint venture project between Conoco and Total S.A. (TOT) and is located approximately 63 kilometers southeast of Fort McMurray, Alberta, in the Athabasca oil sands region.
SAGD is a production technology that injects steam into wells to weaken the oil's viscosity. Surmont is a 50/50 joint venture project between Conoco and Total S.A. and is located approximately 63 kilometers southeast of Fort McMurray, Alberta. The second phase is scheduled to begin production in 2015.
Management sees a progression ramp-up of oil sands projects over the next several years, including Foster Creek, Christina Lake and Surmont. Foster Creek and Christina Lake, located in the prolific eastern flank of the Athabasca oil sands in northeast Alberta, are joint venture projects with Cenovus Energy (CVE). Cenovus was carved out of EnCana (ECA) last year to manage the later's oil sands and refining assets. Following these projects, the company may pursue other oil sands projects in Canada such as Thornbury, Clyden and Saleski.
Conoco has significantly increased its stake in Alberta’s oil sands with the Cenovus joint venture in 2007 (then part of EnCana). This apart, Surmont and the undeveloped resources in the Saleski, Thornbury and Clyden regions also add numbers to the company’s oil sands production volumes.
With leading positions in both natural gas and heavy crude oil in North America and a growing exposure to lucrative international regions, Conoco expects to replace reserves and sustain production growth over the long term, in our view.