CALGARY - Holding off on approving construction on the Kearl oilsands mine until Alberta´s overheated market cooled off saved Imperial Oil Ltd. (TSX:IMO) as much as $1 billion, the company´s chief utive said Tuesday.
Imperial´s board could have endorsed Kearl six to nine months ago, when labour and construction costs were significantly higher, Bruce March told investors and analysts in Toronto.
Instead, it made its decision to go ahead with the $8-billion project on Monday, after spending an extra few months reviewing costs.
"I think if you went back to about year earlier, kind of early summer last year, you´d probably be looking at somewhere between a half to a billion more investment," March said.
"We didn´t get too mesmerized with the high price environment and we didn´t get too overwhelmed with rushing the project through like others did to try to take advantage of this environment."
Kearl is expected to begin producing 110,000 barrels of bitumen a day in late 2012, eventually ramping up to as much as 300,000.
Unlike other major oilsands players like Syncrude Canada Ltd. and Suncor Energy Inc. (TSX:SU), the project does not include an upgrader to process the tar-like bitumen into easier-to-handle synthetic crude.
March told investors Imperial would first look to feed the bitumen into its own facilities, particularly its two refineries in Ontario, that can be converted to handle the heavy crude.
It could also sell the bitumen to upgraders in Alberta as well as the U.S. Midwest and Gulf Coast.
That possibility raised alarm bells with Alberta Federation of Labour president Gil McGowan, who said he worries Kearl will ship upgrading and refining jobs to the United States, where bitumen refining capacity is growing at a "furious pace."
"We´ll get the environmental consequences and the penny-on-the-dollar royalties, while the Americans will get the long-term jobs and revenue that come with value-added production," McGowan said in a statement Tuesday.
Inter Pipeline Fund (TSX:IPL.UN) said Tuesday it reached an agreement to transport up to 60,000 barrels of diluent from the Edmonton area to the Kearl site.
Imperial signed a 25-year ship-or-pay contract with Inter Pipeline for committed capacity on a 12-inch pipeline in late 2012, when Kearl is slated to start up.
Inter Pipeline currently ships diluent, which is mixed with bitumen to make it thin enough to flow through pipelines, along that pipeline to the Athabasca Oil Sands Project, owned by Shell Canada Ltd., Chevron Canada and Marathon Oil Canada Corp.
The pipeline will be idled in 2010 after a new 42-inch pipeline which is currently under construction goes into service for Athabasca Oil Sands Project.
Inter Pipeline plans to invest $135 million over the next three years to connect the existing 12-inch pipeline to Kearl and points around Edmonton.
Inter Pipeline shares were off six cents to $8.40 Tuesday on the Toronto Stock Exchange. Imperial shares were up more than four per cent to $44.10.
Oil Week, Tues May 26 2009