Southern Pacific Provides STP-McKay Operations Update

abarrelfullabarrelfull wrote on 29 Aug 2012 05:38
Tags: canada n-america southern-pacific upstream

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Southern Pacific (“STP” or the “Company”) is pleased to provide an operational update on its STP-McKay Thermal Project near Fort McMurray, Alberta.

STP-McKay Thermal Project
Operations continue to progress well at the STP-McKay Thermal Project as the steam circulation period advances on all of its first 12 SAGD well pairs. The first pad of six well pairs commenced steaming on July 1, with second pad following on July 13. To date, the plant has been running very well, delivering all steam requirements to the wellbores at a 99% on-time load factor. All start-up issues have been resolved with minimal interruption. The wells are readily accepting steam, and warming up in a manner that ensures good conformance along the horizontal sections. The wells are forecast to need three to four months of steam circulation before being placed into production. Southern Pacific expects bitumen production to begin in the fourth quarter of 2012.

Rail Marketing Arrangement
Southern Pacific’s rail marketing arrangements are progressing well in preparation for implementation in January 2013. Southern Pacific announced on June 27 a unique arrangement to transport its bitumen product to the U.S. Gulf Coast using rail. This arrangement includes dedicated loading and offloading capacity at two new rail terminals, located in Lynton, Alberta and Natchez, Mississippi. Both terminals, as well as approximately 500 rail cars, are under construction and on schedule. Southern Pacific has been working with several U.S. Gulf Coast refineries and has received significant interest in its product.

The Company has also identified sources in the U.S. Gulf Coast to purchase diluent and transport via backhaul on its rail cars for use at the STP-McKay plant. The economics for shipping bitumen via rail continue to be favourable in the current pricing environment, bolstered by the wide Brent/WTI differential, lower Gulf Coast diluent costs, and the requirement for less diluent versus shipping bitumen by pipeline. Volumes of bitumen produced prior to January 1, 2013 will be delivered to intra-Alberta markets and these arrangements have also been firmed up.

Expansion Update
Southern Pacific continues to work on the regulatory approval process for the Phase 1 Expansion and Phase 2 of the STP-McKay Thermal Project. Throughout the summer, the Company has been preparing its responses to the first round of Supplementary Information Requests (SIRs) submitted by the Alberta regulators. The responses should be completed by mid September, which should keep the approval process on track for approval by the fourth quarter of 2013.

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