The Canadian Association of Petroleum Producers (CAPP) released its crude oil forecast, which showed that in situ oil sands production would surpass oil sands mining production by 2015.
By 2020, CAPP expects in situ production to reach 1.87 million bpd – and Cenovus should account for about a third of that.
Cenovus is one of the companies leading investment in this oil sands extraction method. The company’s annual results showed in situ production from its Christina Lake and Foster Creek operations increased by 35 per cent between 2011 and 2012. By the time all phases of Christina Lake and Foster Creek are operational in 2019, Cenovus will produce over 600,000 bpd from in situ operations.
The results also show that for the first time Cenovus is producing more from its oil sands operations (90,000 barrels per day) than from its conventional assets (76,000 bpd). Foster Creek and Christina Lake are 50 percent owned by ConocoPhillips. Cenovus also produces heavy oil from the mobile Wabiskaw formation at its 100 percent-owned Pelican Lake operation in the Greater Pelican Region, about 300 kilometres north of Edmonton.
Steam-assisted gravity drainage (SAGD, uses high-temperature steam to soften the oil deposits so they can be separated from the sand and pumped to the surface.
Cenovus (ticker CVE on TSX) trades at ~$31 and has a market cap of $23.4 B.
The oil sands industry is moving to SAGD projects as a result of depleting surface reserves after 3 decades of surface mining and numerous technological advances. Tapping into in situ deposits using SAGD technologies were not feasible nor technologically possible 30 years ago, but, increasingly, they represent the future of the oil sands.