StatoilHydro Plans to Spend $8 Million on Oil-Sands Research

By Vibeke Laroi

Sept. 25 (Bloomberg) -- StatoilHydro ASA, Norway's largest oil company, will spend 45 million kroner ($8 million) during the next five years to research more environmentally-friendly ways of exploiting oil sands.

``We are working with heavy oil in several places around the world and this is an important issue for us,'' company spokesman Kai Nielsen said today by phone from London. ``We want to do it in the best possible way for the environment.''

StatoilHydro will collaborate with the University of Calgary, the University of Alberta and Vancouver Island University in Canada as well as with the Norwegian University of Science and Technology in Trondheim for the research, the state- controlled company said in a statement on its Web site today.

The oil company developed the North Sea Grane field, the first heavy-oil deposit to come on stream on the Norwegian continental shelf in 2003. It's also involved in heavy-oil projects in Venezuela and on the U.K. shelf and agreed last year to buy an oil-sands developer in Canada to gain control over leases in Alberta amid dwindling reserves at home.

Extracting oil from tar sands in Alberta is one of Canada's biggest sources of greenhouse-gas emissions, which may more than double by 2015 as production rises, a UN report said last year. Canada's oil sands are estimated to be the largest reserves outside Saudi Arabia.

Delay Start

StatoilHydro said in August it may postpone the start of an upgrade plant at its Canadian oil sands project for a second time because of rising costs and lack of clarity regarding regulations. In May, the company delayed the start of the upgrader by two years to 2016.

The oil-rich sands must be processed before being refined into gasoline and other fuels. The upgrader facility will help process bitumen, a type of heavy oil, from 257,200 acres (1,110 square kilometers) of oil-sands in Alberta's Athabasca region.

Nexen Inc. has also put on hold the planned expansion of an upgrader at its Long Lake refining project in Alberta.

Increased regulatory scrutiny by governments, disagreements over oil-sands royalties and federal rules on capturing carbon dioxide are slowing development of Alberta's tar sands, according to the Canadian Association of Petroleum Producers.