Breaking News from The Globe and Mail

Devon launching phase 2 of oil sands project

Reuters

Monday, September 08, 2008

CALGARY — — Devon Energy Corp. is embarking on the second phase of its Alberta oil sands project, a multimillion-dollar expansion aimed at doubling output in four years, the U.S. oil independent said Monday.

Devon said it won regulatory approval for phase two of the steam-driven Jackfish project, which will add 35,000 barrels a day of production of tar-like bitumen by 2012. It will start construction immediately.

The $730-million (U.S.) first stage of Jackfish, located south of the oil sands hub of Fort McMurray, started up last year and is expected to pump out 35,000 barrels a day during the first half of 2009, the company said.

The company has not estimated a capital cost for the expansion, but the price tag will be higher than the first phase, spokesman Chip Minty said.

Like nearly all oil sands developments, Jackfish 1 ran over budget due to inflation that has plagued the sector.

Oklahoma City-based Devon is one of a raft of oil companies developing Alberta's oil sands, where the size of the resource is second only to Saudi Arabia's conventional reserves, but is far more complicated and expensive to produce.

Unlike the major oil sands mining developments, the heavy crude at Jackfish is produced using a method called steam-assisted gravity drainage. It involves injecting steam into the reservoir, which loosens up the oil so it can be pumped to the surface in wells.

Devon shares fell 65 cents to $95.04 on the New York Stock Exchange.

© The Globe and Mail