TransCanada is partnering with a state-owned Chinese company to build the proposed $3 billion Grand Rapids Pipeline project, which will transport both crude oil and diluent between Fort McMurray and Edmonton, Alberta.
“As Alberta crude oil production continues to grow, it’s critical to have the infrastructure in place to move oil to market from emerging developments west of the Athabasca River,” said Russ Girling, TransCanada’s president and chief executive officer. “This is the first major pipeline project to meet the needs of this fast-growing area.”
Phoenix Energy Holdings Ltd., the Canadian subsidiary of PetroChina Co. Ltd., has signed a deal with TransCanada Corp. to build a 500 kilometres pipeline between the producing area northwest of Fort McMurray and Fort Saskatchewan, near Edmonton.
TransCanada will operate the system and Phoenix has entered into a long-term commitment to ship crude oil and diluent, with each party owning a 50 per cent stake in the project.
The proposed dual pipeline will have the capacity to move up to 900,000 barrels-a-day (bbl/d) of crude oil and 330,000 bbl/d of diluent
The final pipeline route and design will be determined with Aboriginal and stakeholder input, as well as consideration for environmental, archaeological and cultural impacts, land use compatibility, safety, constructability and economics.
TransCanada expects to apply for regulatory approval for the project in 2013.
“Phoenix is committed to developing its Dover and MacKay River oilsands assets through multiple phases,” said Zhiming Li, Phoenix’s president and chief executive officer.
“Given that transportation in the Athabasca region has become a bottleneck, working with TransCanada to build a pipeline system in a timely fashion is crucial to implement our development strategy.”
Even though a route for the pipeline has yet to be determined, it is expected to transport oil from the MacKay River and Dover projects, which are largely owned by PetroChina.
Athabasca Oil Sands Corp. sold 60 per cent of the MacKay River and Dover oilsands projects to joint-venture partner PetroChina for $1.9 billion in 2009.
The company decided to sell its remaining 40 per cent stake in the MacKay River oilsands project to PetroChina for $680 million in January.
PetroChina activities in Canada are carried out under a series of names, including Dover Operating Corp., which awarded a contract to SNC-Lavalin in December 2011 to provide detailed engineering and procurement services for the MacKay River Central Plant Project.
Construction of the central processing plant, which will be located about 40 km west of Fort McMurray, is underway.
It is designed to process 35,000 barrels per day of bitumen steam assisted gravity drainage (SAGD) production.
The MacKay River Commercial Project is expected to produce 150,000 bpd bitumen with an initial phase of 35,000 bpd projected for 2014 start-up.
The project is expected to recover 1.7 billion barrels of bitumen over its projected 45-year lifespan.
The Dover Commercial Project, which is located about 95 kilometres northwest of Fort McMurray, will also utilize SAGD technology, as well as a phased construction strategy with an ultimate design production capacity of 250,000 bbl/d of bitumen.
This project is in the final stages of regulatory approval. Subject to approvals, fieldwork could begin as early as this year.
The project will recover an estimated four billion barrels of bitumen over its projected production lifetime of 50 years.
PetroChina wanted partial ownership of the Grand Rapids Pipeline project to ensure it will be constructed because the company needs to transport production from these projects.