Fort Hills Oil Sands Project Gets Go-ahead
The Fort Hills project is scheduled to produce its first oil as early as the fourth quarter of 2017 and to achieve 90% of its planned production capacity of 180,000 bbl/d within 12 months. With best-estimate contingent resources of approximately 3.3 billion bbl of bitumen, the mine life is expected to be in excess of 50 years at the current planned production rate.
The go-forward capital investment in Fort Hills is estimated at approximately $13.5 billion. The total project cost is estimated at a capital intensity of approximately $84,000 per flowing barrel of bitumen and is within the range of similar recently completed oil sands mining projects.
During a conference call discussing Teck’s participation in the Fort Hills project, Teck President and CEO Don Lindsay said, “We are often asked if we want to be a mining company or an energy company, and we don’t think that these are mutually exclusive. Teck is already, in fact, in the energy production universe, but in a pretty small way, with our low-cost hydroelectric facility near Trail, and also another joint venture with Suncor in the Wintering Hills wind farm.
“Adding mined oil sands and bitumen to Teck’s portfolio is a strategic diversification that transforms energy into a significant business unit. Many world-class diversified mining firms also have a significant mined energy production in their portfolio, such as thermal, coal or uranium. In our case, it will be mined oil sands. We do not plan to go into in situ oil sands or conventional energy exploration and production.
“In addition, oil is also a natural hedge for Teck as it is a significant operating cost at our other operations.
“Mined oil sands leverage our core competencies in large truck and shovel mining projects. No one has more experience than Teck in large open-pit mines in the Canadian north. We currently operate 34 of the largest mining shovels, including 10 of the 72-yard-class shovels planned for Fort Hills, and 250 largescale mining trucks at eight similar operations in coal and copper.
“While Suncor is the operator at Fort Hills, Teck is involved in the management committee. We review and provide input into the mine design based on our extensive experience in large-scale truckand-shovel mining projects and our processing capabilities. In addition, we will add value through our expertise in reclamation of mined land. The mine will be designed to optimize and protect land use by utilizing the latest technology and approaches to tailings management and reclamation. Existing and future water quality and environmental regulations will be met or exceeded throughout the life of the project.”