ConocoPhillips and EnCana create oilsands behemoth
ConocoPhillips and EnCana Corporation have joined forces to create a North American heavy oil business with upstream and downstream assets.
ConocoPhillips and EnCana Corporation have joined forces to create a North American heavy oil business with upstream and downstream assets. The venture will be made up of two 50/50 partnerships: one Canadian upstream operation and one US downstream operation; both companies are contributing equally valued assets and equity to the venture.
“With this strategic alliance, ConocoPhillips strengthens its presence in North America by repositioning 10% of its US downstream business to access a large upstream resource base,” said Jim Mulva, ConocoPhillips’ chairman and chief executive officer. “The upstream partnership also will provide a secure and stable source of oil supplies that can be refined into gasoline, diesel and other petroleum products needed by US consumers, as well as a significant market for Canada’s abundant oilsands resources.”
The upstream operation will include EnCana’s Foster Creek and Christina Lake projects, both located in Alberta’s Athabasca oilsands. The assets hold estimated recoverable bitumen of more than 6.5 billion barrels, and the partnership’s goal is to increase production from the current 50,000 barrels per day (bpd) to 400,000 bpd of bitumen by 2015. ConocoPhillips and EnCana will each own 50% of the partnership, and EnCana will manage the operation from Calgary.
The downstream entity will comprise ConocoPhillips’ Wood River and Borger refineries, located in Illinois and Texas. The partnership plans to expand heavy oil processing capacity at these facilities from approximately 60,000 bpd to 550,000 bpd.
ConocoPhillips and EnCana will each own 50% of the operation, which plans to purchase and transport all feedstock for the refineries and sell the refined products. ConocoPhillips will manage the operation from a base in Houston.
“These partnerships provide greater certainty of execution for our oilsands projects by reducing cost and price risk and increasing confidence in our ability to achieve economic returns,” said Randy Eresman, EnCana’s president and chief executive officer. “They also give EnCana immediate participation in the North American refining industry and provide options for future upgrader development.”