Imperial Oil Sees Output Gains from Oil-Sands

The top executive at Exxon Mobil Corp.'s Canadian subsidiary on Wednesday said new technology has the potential to more than double production from a series of proposed oil-sands projects, a bullish signal for Canada's high-cost heavy oil operations even as it faces a slump in crude oil prices and falling investment.

Exxon subsidiary Imperial Oil Ltd. said pilot tests show a nearly 30% increase in production using a modified version of its steam-assisted gravity drainage, or SAGD, technology, which recovers deposits of heavy oil embedded in sand with injections of steam deep underground. The new techniques include adding a solvent to improve the flow of oil to surface, known as SA-SAGD, and generators that burn less natural gas to supply steam, Chief Executive Rich Krü ger said.

Those innovations could boost output from each of at least seven proposed oil-sands well projects to 55,000 to 75,000 barrels a day in crude production, up from 30,000 to 40,000 barrels a day at current-generation well sites, Mr. Krü ger said.

"This is bigger on a per phase basis than we've talked about in the past," Mr. Krü ger told investors at a conference in Toronto, adding he sees the initiative as "a very large, long-term growth opportunity."

Aspen, the first of those planned projects, could start as soon as 2020. But Mr. Krü ger said the company has yet to approve Aspen as it evaluates the business case for it and the others, each of which would cost about 2 billion Canadian dollars to develop.

The decision will come even as Imperial plans to cut its total investment budget in half over the next five years to about C$2.5 billion annually after splurging on two major oil-sands projects that recently began production. Those two operations—its Kearl surface mine and Nabiye well site—will boost the company's output by a combined 120,000 barrels of oil a day to a total of more than 400,000 barrels a day.

"We think we're commercially ready to go on SA-SAGD" technology, Mr. Krü ger said, but he added the company is in no rush to make a decision on whether to move ahead. Imperial is currently assessing their cost, possible changes in Alberta's regulatory policies and the outlook for oil prices, he said.

Most new oil-sands well plants require benchmark U.S. crude prices above $67 a barrel to break even, which is well below current levels of around $45 a barrel, according to RBC Dominion Securities. Oil from Canada's oil sands is among the most expensive forms of crude to produce because it is difficult to extract, lower in quality than lighter grades and located in a remote area of northern Alberta.

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September 23, 2015 18:35 ET (22:35 GMT)

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