Conoco and Total to quadruple Surmont capacity

ConocoPhillips and Total are planning to quadruple capacity at their oil sands project near Fort McMurray in Alberta.  The second phase of the Surmont project will expand capacity from 27,000 to 110,000 barrels of bitumen per day by 2015. The site is located approximately 63 kilometers south-east of Fort McMurray in the Athabasca oil sands region. The two companies did not disclose the cost of the project. Surmont, a 50-50 joint venture between its Houston-based operator ConocoPhillips and the French energy giant Total, is the latest oil sands project to start up since low oil prices and the economic downturn created a lull in activity throughout much of last year. Suncor Energy and Imperial Oil have also announced new projects in the oil sands region of northern Alberta, taking advantage of lower costs. The oil sands represent┬áthe largest proven oil reserves outside Saudi Arabia. "Surmont is an important part of our oil sands portfolio and weÔÇÖre pleased to announce its next phase of development," said John Carrig, president and chief operating officer of ConocoPhillips. "The oil sands are an area of significant future oil production growth and are important for short- and long-term energy and economic security in North America." He continued: "We believe that our oil sands projects and the conversion of crude oil produced from oil sands to fuel can be conducted in an environmentally sustainable manner and that technology will play a significant role in managing the environmental footprint.ÔÇØ  Surmont uses an extraction process known as steam-assisted gravity drainage, or SAGD, which involves injecting steam via a pipeline to melt heavy oil deep underground before pumping it through a further pipeline to the surface. The method preserves more of the region's landscape than other methods; however, it does burn natural gas to produce the steam, generating significant amounts of greenhouse gases. Oil sands projects that do not use SAGD traditionally entail the use of tailing ponds and the destruction of large areas of the local habitat. ConocoPhillips and Total have pledged to spend $300 million on research and development over the next five years to come up with new ways of reducing Surmont's environmental footprint. Last year, ConocoPhillips said it would cut capital expenditure by 10 percent this year in order to increase profitability; however it confirmed that one area in which it would continue to spend money would be its Canadian oil sands projects. Construction at the Surmont site is expected to create around 2,500 jobs in addition to further indirect employment in the manufacturing and service sectors. It is anticipated that 300 additional jobs will be created at the projectÔÇÖs Calgary office and in the field. ConocoPhillips already has an oil sands and refining venture with Cenovus Energy and controls several other leases in the region. Total is involved in developing the Joslyn project, which could eventually produce 200,000 barrels a day, alongside other oil sands holdings.