Husky Energy to inject $1 billion in Lloyd area

By Geoff Lee

December 15, 2016 12:00 AM

New thermal heavy oil projects on the chalkboard

Husky Energy has approved three new thermal heavy oil plants in the Lloydminster region at a total investment of more than $1 billion.
Subject to regulatory approval, the new thermals will produce an additional 30,000 barrels of oil per day with first production from all three in 2020.
“Each thermal represents an investment of about $350 million, so you are looking at just over $1 billion with the three new ones we’ve announced,” said Husky spokesperson Mel Duvall.
The projects were announced during Husky’s conference call to discuss its 2017 capital plan and production outlook on Tuesday.
“Each plant employs about 30 people when it’s all up and running—they are big boosts to the economy,” said Duvall. 
The three new plants in the region are Dee Valley, Spruce Lake North and Spruce Lake Central.
Husky is making thermal oil expansion in Lloydminster its top operational objective for 2017.
“On the top of our priority list is expanding our thermal business,” said CEO Rob Peabody in Calgary.
“The three newest Lloyd projects at Edam East, Vawn and Edam west are going full tilt.”
Peabody noted the newest producing thermals are collectively producing 30,000 bpd, exceeding their design capacity of 25,000 bpd.
“We are also advancing construction of Rush Lake 2, a 10,000 barrels per day project that is on track for first oil in the first half of 2019,” said Peabody.
Increasing volumes from the new thermals in the Loyd region and from Husky’s Tucker Lake and Sunrise projects are expected to raise average thermal production in 2017 to about 125,000 bpd,
That’s a 30 per cent increase over 2106 average thermal production.
Annual average production in 2017 is expected to be in the range of 320,000-335,000 barrels of oil equivalent per day.
Tied to the growth of thermal oil is Husky’s plans to double the capacity of the Lloydminster Asphalt Refinery to 60,000 bpd.
“In Lloyd, engineering is progressing on a project to double asphalt capacity by 2021,” said Peabody.
“The project, which would be considered for sanction next year, would provide another home for our growing thermal production without the need for more pipeline takeaway capacity.”
The potential project fits Husky’s second operational priority in 2017 to maximize profit margins through its integrated downstream business, led by refineries.
“Through these value chains, we are able to maximize margins for our Lloyd and Sunrise production,” said Peabody.
Husky is also expanding its Lima and Toledo refineries in the U.S. to process more heavy oil produced in Western Canada.
“Overall, our total heavy oil processing capacity will surpass 210,000 bpd by the end of 2018,” said Peabody.
Husky noted that no work is yet taking place on the ground for its potential asphalt refinery expansion and no decision has been made on the location.
“We’re in engineering stage at this point—we’re getting closer to a decision but we haven’t made a decision yet,” said Duvall.
Husky’s capital expenditure program for 2017 will be in the range of $2.6-2.7 billion with a cost estimate for the asphalt refinery to be made by the company’s board if the project is approved.
“An investment of something this size is done by the board,” said Duvall.
Husky announced a four week turnaround at the Lloydminster Refinery in the second quarter of 2017 with a seven week turnaround at the Lloydminster Upgrader also in the second quarter.
Duvall couldn’t provide an immediate estimate of the number of workers that will be brought in for both turnarounds,  but he said it would be sizeable.
“They are substantial numbers when we do them —the upgrader in particular—it requires quite a large workforce to come in when we do those,” he said.
Duvall noted a new turnaround industry is being created by the growing suite of thermal plants in the region.
“To a lesser extent, even the thermals require turnarounds as well,” said Duvall.
” It’s a source of employment that typically hasn’t been associated with our production in that area.”
He said now that Husky is moving to more of a manufacturing approach to production, you can include the turnarounds in with that.

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