Partners BP and Husky expect oil from Sunrise Energy Project by Q1 of next year
On December 11, Husky Energy (ticker: HSE) announced that it has commenced steam operations at its Sunrise Energy Project, a joint venture (JV) with BP (ticker: BP), in the northeast Alberta oil sands. Husky is the operator of Sunrise and has a 50% working interest in the project with BP, which operates the jointly-owned BP-Husky Toledo, Ohio, refinery.
“The production of steam is the last major milestone before first oil,” said Husky CEO Asim Ghosh, in a company press release. Sunrise is being developed using steam assisted gravity drainage, an oil well technology that heats the underground bitumen layers until oil is warm enough to flow.
Phase 1 of the project is expected to produce 60 MBOPD between two processing plants, according to Husky. The first 30 MBOPD plant is expected to begin production towards the end of Q1’15. The second 30 MBOPD plant is expected to being steaming mid-year, with production commencing a few months later. Production is expected to ramp up to full capacity over a two-year period. The initial price tag was forecast at $2.5 billion, but management mentioned the cost will likely reach $2.8 billion in its Q3’14 earnings release.
According to a Husky investor presentation, Sunrise has 3.7 billion barrels of 3P reserves, with approvals already in place to produce up to 200 MBOPD. The company expects that the asset will have a production life of 40-60 years. “As a longer-life project, Sunrise will deliver steady production and cash flow to support our expansive portfolio of projects,” said Ghosh.
The long term plan for Sunrise involves three phases of development, growing production to the already approved 200 MBOPD mark, according to BP. A second 70 MBOPD phase is currently in the design stage, while the third phase is in early appraisal.
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