BP signs further oil sands deal

BP has entered into its second oil sands project in the space of a week, this time with CanadaÔÇÖs Value Creation Inc., it has been revealed.  The UK oil major has agreed to buy a majority stake and help advance exploration on Value CreationÔÇÖs 75,000-hectare Terre de Grace blocks in the Athabasca region of northern Alberta. London-based BP will make ÔÇ£significant capital contributionsÔÇØ to the partnership, with the final price depending upon drilling undertaken by the partners to determine the size of the property's reserves, since much of the Terre de Grace land remains unexplored. The transaction will provide privately-held Value Creation with a clean, debt-free balance sheet. It is believed that the Terre de Grace area could contain billions of barrels of recoverable bitumen. Calgary-based Value Creation has regulatory approval to proceed with a 10,000 barrel per day project but needs to work on the development plan. The project would use steam-assisted gravity drainage technology, which pumps steam generated by natural gas underground to liquefy bitumen, forcing it to the surface. The northern Alberta oil sands region has the largest crude reserves outside the Middle East and is one of the few remaining places in the world where investor-owned oil companies are able to invest in the development of significant oil resources. With oil prices on the rise, the oil sands industry is now on the rebound after grinding to a halt during the recession. Last week, BP paid $7 billion for offshore Brazilian and Gulf of Mexico properties from Oklahoma, US-based Devon Energy Inc. As part of the deal it sold a 50 percent interest in its Kirby oil sands property to Devon, who will now take on the operating role to explore and develop Kirby. BPÔÇÖs deal with Value Creation further demonstrates the companyÔÇÖs strong and renewed interest in long-term oil sands developments. BP already holds a half share in an oil sands and refining venture with Calgary-based Husky Energy Inc., which is in the early stages of construction. Value Creation has other holdings in other significant oil sands leases, over which it will retain 100 percent control. It also has plans to build a merchant oil sands upgrader in CanadaÔÇÖs Industrial Heartland region near Edmonton. Value Creation's BA Energy subsidiary, which has regulatory approval to develop a 260,000 barrel per day upgrader to convert bitumen from oil sands into synthetic crude, was placed under protection from creditors in late 2008 when it was unable to pay its bills. Value Creation is due to request a Canadian court this week to approve a plan to bring the unit out of court protection.