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Riches in Sand: Market Benefits Development of Oil Sands

This is an abridged version. The full text is avaiable to subscribers to The Russian Energy weekly.

The stability of high oil prices makes it possible to launch such projects that used to be considered insufficiently profitable. Oil sands, which contain great amounts of oil in the form of bitumen, can be developed— and not only in Canada, which possesses the largest deposits of this commodity, but also in the European part of Russia.

From Beijing to London

Two significant events occurred within a few days in this sector. The Chinese demonstrated they are more than interested in Canadian oil sands; and the British decided to help oil sands developers in Canada sell their production in Europe. It bodes well for this specific business.

CNOOC established full control of OPTI Canada Inc., a Calgary-based developer of bitumen. OPTI holds 35% in the Long Lake project and three other projects (Kinosis, Leismer, and Cottonwood) in the Atabaska basin in northeastern Alberta. The other partner in Long Lake with the stake of 65% is Canada’s Nexen Inc.

As an indirect wholly owned subsidiary of CNOOC, OPTI has asked the TSX Venture Exchange to delist OPTI shares. Subject to approval by the exchange, the delisting of the OPTI shares was anticipated on December 1. The Chinese owners decided to keep the asset to themselves and finance its activities without borrowing from the stock exchange. The sum of the deal, $2.1 bln, shows that China is serious about oil sands as a source of income.

Bitumen production of Long Lake is to peak at 72,000 bpd at the current phase of development, or 58,500 bpd of final product, mostly sweet 39°API crude.

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