ConocoPhillips’ (NYSE:COP) operations in Canada primarily consist of natural gas production in western Canada and oil sands developments in Alberta. In 2013, the company’s Canadian operations contributed almost 17% and 20% to its worldwide liquids (crude oil, natural gas liquids and bitumen) and natural gas production, respectively. 
ConocoPhillips plans to invest around $5 billion in the development of its oil sands assets in the short to medium term. These projects are expected to add around 100 thousand barrels of oil equivalent per day (MBOED) to its current production rate by 2017, net of normal field declines. Here, we take a closer look at some of the key ongoing development projects that would boost the company’s bitumen production in the coming years.
We currently have a $77 price estimate for ConocoPhillips, which is around 10% above its current market price.
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ConocoPhillips holds around 0.9 million net acres of land in the Athabasca Region of northeastern Alberta. The company’s bitumen resources in Canada are produced using an enhanced thermal oil recovery method called steam-assisted gravity drainage (SAGD). In this process, a pair of horizontal wells is drilled into the reservoir, one above the other with a gap of a few meters between them. After this, high-pressure steam is injected into the upper well to reduce the viscosity of bitumen, which causes it to drain into the lower well, from where it is pumped out to the surface for further processing. ConocoPhillips’ 2013 bitumen production rate averaged around 109 MBOED, ~88% of which came from the FCCL partnership and the remaining 12% from the Surmont project.
The FCCL Partnership is a 50-50 joint venture between ConocoPhillips and Cenovus Energy Inc., an integrated oil company headquartered in Calgary, Alberta. Cenovus is the operator of assets owned by the joint venture. Foster Creek, Christiana Lake and Narrows Lake are the three SADG bitumen development projects operated by FCCL. The ongoing expansion work in all these projects is expected to increase the total gross production capacity of FCCL to 750 MBOED in the long run from around 200 MBOED currently.
- Foster Creek: The Foster Creek project is located around 200 miles northeast of Edmonton, Alberta. Currently, there are five producing phases at Foster Creek, Phases A through E, with three more under construction – Phases F, G and H. The first production from Phase F is expected in the third quarter of this year, while Phases G and H are anticipated to start producing in 2015 and 2016, respectively. These phases, in addition to the planned optimization of the currently producing ones, are expected to add approximately 125 MBOED of gross production capacity at Foster Creek. The FCCL also applied for a regulatory approval for Phase J of the project last year.
- Christina Lake: The Christiana Lake project is located around 75 miles south of Fort McMurray, Alberta. Currently, there are five producing phases at Christina Lake, Phases A through E, with plans underway for three additional phases – Phases F, G and H. Total gross production form the Christina Lake project increased more than 55% last year. This was primarily due to the ramp up of Phase D of the project to its full capacity in the first quarter of 2013, and production start-up from Phase E in the third quarter. The start-up of Phase E boosted Christiana Lake’s gross production capacity by 40 MBOED. Phase F of the project, which is currently under construction, is expected to add another 50 MBOED of gross production capacity. It is expected to come online in 2016. The three expansion phases along with the ongoing optimization of the existing ones are expected to take Christiana Lake’s total gross production capacity to around 310 MBOED in the long run.
- Narrows Lake: The Narrows Lake project is located near Christina Lake and is expected to have three phases of development. Construction of Phase A of the project, which is estimated to have a gross production capacity of 45 MBOED, started last year. First production from the Narrows Lake project is anticipated in 2017.
The Surmont oil sands project is located around 35 miles south of Fort McMurray, Alberta. It is a 50-50 joint venture between ConocoPhillips and Total S.A. ConocoPhillips is the operator of the project. Production from Phase 1 of the project started in late 2007, and is currently producing bitumen at a rate of around 27 MBOED. Phase 2 of the project, which is expected to boost its gross production capacity to 136 MBOED, is currently under construction. First production form Surmont Phase 2 is anticipated in 2015.
Together, these projects are expected to double ConocoPhillips’ net daily bitumen production rate from current levels by 2017.Notes:
- ConocoPhillips’ SEC Filings, sec.gov [↩]