BP to proceed with Canadian oil sands investment

UK oil major BP will signal at its AGM today that it will proceed with plans to invest in CanadaÔÇÖs oil sands, according to a report in UK newspaper the Financial Times.  Until now the company has not had a presence in the vast resources of CanadaÔÇÖs oil sands in north-eastern Alberta, which contain the largest known oil reserves in the world outside of Saudi Arabia in the form of bitumen. The company is currently working on its proposed $2.4 billion Sunrise project, split 50-50 with Calgary-based Husky Energy, and expects to make the final investment decision with respect to the projectÔÇÖs first phase by early next year. Sunrise is a world-class bitumen deposit, with estimated resources in excess of three billion barrels. The first phase will have a capacity of 60,000 barrels per day, with production expected to commence in 2014. Sunrise will use in-situ steam assisted gravity drainage (SAGD), a technique which injects steam into the reservoir, warms the oil and allows it to be produced to the surface where it is piped directly to the refinery. BPÔÇÖs annual sustainability report indicates the projectÔÇÖs economics will look attractive to shareholders on the basis that oil prices will range from $60 to $90 per barrel until 2015. But more than 140 investors have backed a resolution calling for BP to review its plans, which opponents say pose environmental and social risks, the FT said. The sustainability report points out, however, that the greenhouse gas emissions are lower for some oil sands projects than for some types of conventional oil production. The company also says that action has been taken to mitigate some of the harmful effects and emissions from the Sunrise joint venture. Referring to the extraction process, a BP document detailing its oil sands projects states: ÔÇ£We believe there is potential for further improvements and together with our Joint Venture partners, we continue to develop and test improvements in SAGD technology. We will incorporate technologies and operating practices that will improve the projectÔÇÖs energy use and greenhouse gas emissions.ÔÇØ The document went on to say: ÔÇ£The BP board supports the strategy to move into oil sands in a way that optimises the use of BPÔÇÖs technology in a responsible way. ÔÇ£The Company has clear policies and processes for taking individual investment decisions which consider multiple sensitivities and varying risks including those of a regulatory, environmental and social nature. They are also tested against a range of oil prices and an internal price of carbon.ÔÇØ BP also commented that steps were being taken to protect the surrounding area, including the Athabasca River, the local landscape and local stakeholders across a wide geographic area up to 100 kilometres from the project site. The shareholder resolution is expected to be defeated.