Statoil halts Alberta oil sands plans on rising costs

Statoil has decided to postpone the previously planned Corner field development at the Kai Kos Dehseh oil sands project in Alberta, Canada.

“Despite the improvements made in the Corner business case, we have decided not to go any further with the project at this stage,” said Statoil Canada country manager Stale Tungesvik.

“Costs for labour and materials have continued to rise in recent years and are working against the economics of new projects," he continued. "Market access issues also play a role -- including limited pipeline access which weighs on prices for Alberta oil, squeezing margins and making it difficult for sustainable financial returns.

"The decision is in line with Statoil’s strategy to prioritise capital to the most competitive projects in its comprehensive global portfolio and is consistent with our stepwise approach to the oil sands,” Tungesvik says.

The Corner project is being postponed for a minimum of three years. As a consequence of the Corner decision, a staff reduction in the range of 70 employees is expected.

Statoil entered Kai Kos Dehseh (KKD) through the acquisition of North American Oil Sands Corp. in 2007, and in 2011 the Thai company PTTEP farmed into a 40% interest in KKD for $2.28 billion in cash.

Earlier this year, Statoil divided its oil sands leases with PTTEP, in which Statoil would have 100% ownership of the Leismer and Corner projects while PTTEP took 100% ownership of  the Thornbury, Hangingstone and South Leismer areas.

The decision has no implications for the Leismer project, which is in production and has an operating capacity of 20,000 bpd. The Leismer project is a SAGD (steam-assisted gravity drainage) development of KKD. In August, well pad 5 came on stream, and work is ongoing for further infill drilling activity.