Oil and gas: Husky approves new heavy oil thermal projects

Source:Husky Energy

Husky approves new heavy oil thermal projects Husky Energy (TSX:HSE) has sanctioned two new heavy oil thermal projects in Saskatchewan, which will deliver a total of 20,000 barrels per day (bbls/day) of production.

Engineering is underway with construction of the 10,000 bbls/day Edam East project and the 10,000 bbls/day Vawn project scheduled to begin this year with first oil expected in 2016. The projects build on the success the Company has had in the Lloydminster region in using thermal technology to access longer life heavy oil deposits.

"Three years ago, with heavy oil production fighting to remain flat, we implemented a strategy to transform and rejuvenate the business. We are seeing the results of that today," CEO Asim Ghosh said. "Steady performance from our existing thermal facilities and these two new plants, along with projects currently under construction at Sandall and Rush Lake, will add another 33,500 bbls/day of new production over the next three years, more than offsetting declines in non-thermal production."

Husky's growing focus on thermal projects is guided by a rich portfolio of opportunities and a proven template of smaller Steam-Assisted Gravity Drainage (SAGD) plants providing better access to heavy oil reservoirs. The two new plants will be nearly identical to the Pikes Peak South and Rush Lake projects. A solid return on investment is being generated for the Company from low operating costs, which were under $10 per barrel at existing plants in 2013, efficient project execution, time to first oil, and the long life nature of the projects.

In December 2012, Husky set a target of achieving 55,000 bbls/day of production from thermal projects by 2017. With the continued success of its thermal projects that timeline is being accelerated to 2016. Steaming is currently underway at the 3,500 bbls/day Sandall thermal project with first production expected this quarter, and construction is advancing at the 10,000 bbls/day Rush Lake project, with first oil expected in the second half of 2015.

Husky has a pipeline of additional thermal projects under evaluation for development. The Company is further integrating its heavy oil business by taking advantage of its Lloydminster Upgrader, existing pipeline systems and the proposed crude oil flexibility project at the Lima, Ohio Refinery. Through this focused integration Husky is able to maximize the value realized for its heavy oil production.

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