When it comes to patience in the oil and gas business, Japan Canada Oil Sands Ltd., or JACOS, is in a league of its own.

The company, founded by the Japanese government in the wake of the oil crisis of 1973 and its devastating effect on the island nation's economy, has been in the oilsands business since 1978, when it "farmed in" on northern Alberta leases held by Petro-Canada (now Suncor Energy), Canadian Occidental (Nexen Inc.) and Esso (Imperial Oil).

While those partners have gone on to successful commercial projects, JACOS, the first foreign firm in the oilsands, is still operating a pilot project -- an 11-year-old steam-assisted gravity drainage pilot project -- producing 8,000 barrels a day.

In 11 years, JACOS has produced 22 million barrels of bitumen, the amount Suncor churns out in about two and a half months.

JACOS president Toshi Hirata, 52, has spent most of his working life on the project. The native of Tokyo is a reservoir engineer who came to Canada 22 years ago and has been here since, aside from a five-year stint working on the project from Tokyo. He was promoted five years ago.

He has raised a family in this country -- his son and daughter, both born in Canada, are attending the University of Calgary this fall.

The company, now 88 per cent owned by publicly traded JAPEX, which is in turn 34 per cent owned by the Japanese government, applied earlier this year for regulatory approval of a 35,000-bpd commercial project which will be 25 per cent owned by Nexen. The $1-billion project would start production in 2014.

JACOS has the rights to leases covering 46,000 hectares in five areas of northern Alberta, with expected recoverable bitumen in place of 1.7 billion barrels.

Hirata was interviewed at the company's office in downtown Calgary.

Question: Your company has been involved in the oilsands for 32 years. How has your mandate changed over that time?

Answer: Originally, this company was started as a Japanese national oil project for the security of Japanese energy. At that time, the main focus was just to do research for future energy, because the oilsands were not commercial at all. But since SAGD was successfully tested and Japanese government wanted to commercialize this project as soon as possible because they spent long years . . . the structure of the ownership was changed. Until 2005, Japanese government held 70 per cent of this company, JACOS, but after that the government sold all of their shares to the public. Indirectly, (through JAPEX) the government still has some ownership of the project.

Q: How did the ownership change affect your mandate?

A: We need to bring profit from this project, but still our long-term strategy is to develop this oilsand from a long-term perspective. We are saying in our company vision (reads) 'to provide a cost-eff ective, long-term and stable hydrocarbon supply to a worldwide market.'

Q: Worldwide versus Japan?

A: Yes, that's right. It's a big vision because currently we are only selling to the North American market.

Q: How does that fit in with the original mandate to provide energy security in Japan?

A: Currently, our production scale is not big enough to support Japanese energy security even though we have a pretty big reserve. So the immediate target is to make a good commercial project.

Q: The demonstration project is 100 per cent owned by JACOS, but Nexen will own 25 per cent of the commercial plant. Are they on board with your timeline?

A: They are very positive in this development. A final decision will be made next year.

Q: Nexen has its own SAGD/upgrader project at Long Lake. Is it contributing to the technology JACOS will use?

A: JACOS and JAPEX, we jointly participated in the UTF (Alberta government-initiated Underground Test Facility) project in 1992. Then JACOS started our own SAGD demonstration project at Hangingstone. So we learned from UTF and we optimized the technology by ourselves. We believe that's our strength. We are the SAGD experts.

Q: JACOS experimented with cyclic steam stimulation, another in situ recovery technology, for several years. Why did you decide to go with SAGD?

A: There was no commerciality. The main reason was a much higher steam-oil ratio (the amount of steam required to produce a unit of bitumen). From our CSS pilot, it was between five and 10 (SOR). That's high. If you try CSS in the Athabasca oilsands, always it is high.

Q: What's your current SOR at Hangingstone?

A: About 4.0.

Q: Some companies are reporting much lower SORs, Cenovus Energy, for instance, says it has a SOR of around 2.0 at Christina Lake. Why the diff erence?

A: The main difference comes from the reservoir conditions. They have a very thick and very clean oilsands, which can produce a very low SOR, very good efficiency. Also, some of the good numbers come from the early stage of the project. When the well is young, you can make a good SOR. Because when the well gets older, you have to bring oil from a farther area to the well and that takes more energy.

Q: Are you still using original wells after 10 years?

A: Yes, it's a mixture of old and new wells. We have 19 well pairs.

Q: How much capital has the company invested in the oilsands to date?

A: More than $300 million, roughly.

Q: When do you expect payout for your shareholders?

A: Of course, depending on the oil price, but seven to 10 years.

Q: You must be excited to be moving into a commercial phase. But has it been frustrating, too, that it's taken this long?

A: Not frustrating, no. We understand we are slower than Canadian competitors. We wanted to make sure we were fully prepared for expansion. We don't want to make any mistakes. That's why we spent good time on our demonstration projects and we spent time on learning many things. We are very comfortable now to go to the next stage and very confident to achieve our targets.

dhealing@theherald.canwest.com