Imperial Oil starts up Kearl oil sands production


TORONTO -- Imperial Oil announced Saturday the startup of the initial phase of its Kearl oil sands project in northeastern Alberta, a project the Calgary energy company is counting on as key source of crude for more than 40 years.

The project has been plagued by cost overruns, and initial production comes amid an uncertain outlook for Canadian heavy oil prices because of a shortage of pipeline capacity to the US and increased light oil production in that country.

Imperial Oil, majority-owned by ExxonMobil, said in February the final cost for Kearl's initial development is expected to be 12.9 billion Canadian dollars ($12.69 billion), up from C$10.9 billion in 2011.

Located in the Athabasca region of northeastern Alberta, production from Kearl's initial development is expected to reach daily production of 110,000 bbl by later this year. Expansion of Kearl will add another 110,000 bpd by late 2015, and the project has the potential to produce a regulatory capacity of 345,000 bpd by about 2020, Imperial Oil said in its release.

"Kearl is the largest project we've ever undertaken and the beginning of a period of substantial growth for the company that will see us double production to more than 600,000 barrels per day by about 2020," Rich Kruger, Imperial Oil's chief executive, said in a release.

Opposition from environmental groups is one of the biggest challenges oil sands developers face because crude produced from these operations is more carbon intensive to produce than many other types.

Imperial Oil made a point to highlight the advanced technologies used at Kearl to reduce the project's environmental impact.

"Diluted bitumen produced from Kearl will have about the same life-cycle greenhouse-gas emissions as many other crude oils refined in the United States as a result of technologies which significantly enhance environmental performance," the company said.

Dow Jones Newswires

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