Teck advances its oilsands projects

Teck Resources (TCK.B-T, TCK-N) is looking to produce more than 30,000 barrels of bitumen per day by 2016 from its oilsands projects in Alberta.

The diversified miner has three such projects in Alberta’s Athabasca region. The most advanced is the Fort Hills project 90 km north of Fort McMurray. Teck owns 20% of Fort Hills, while Total E&P Canada owns 39.2% and the project’s operator, Suncor Energy (SU-T, SU-N), controls the remaining 40.8%.

Fort Hills is undergoing engineering studies to improve the design and accuracy of the costs estimates prior to a project sanction decision in late 2012 or early 2013. 

The project has an estimated resource of 3.4 billion barrels of bitumen, which could be recovered through open-pit mining over 50 years. 

Fort Hills is set to be developed in two phases. According to Total E&P’s website, the first phase of about 164,000 barrels per day has already received the necessary administrative approvals. Teck’s one-fifth of the pie would total 11 million barrels per year. Phase one bitumen production is expected to start in mid-2016.

Teck also has a 50% stake in the Frontier and Equinox oilsands projects. Its partner SilverBirch Energy (SBE-V) holds the remainder. The Equinox project is west of Fort Hills and covers 2.8 sq. km of oilsands leases. Teck estimates that its 50% interest in the Frontier project represents 1.22 billion barrels of contingent bitumen resources. Some 10 km north of Equinox is the 26.1-sq.-km Equinox project.

On a late July conference call, Don Lindsay, Teck’s president and CEO, noted that the company completed a capital cost estimate and a design basis memorandum at the Frontier and Equinox projects.

It’s now working on a pre-feasibility study for Frontier with the possibility of mining Equinox as a satellite deposit. Completion is anticipated before 2012. Around this time, the company will also file a regulatory application to kick off the permitting process for the projects.

The first two production trains are estimated to have a 159,000-barrel-per-day production capacity and should cost $14.5 billion, within a -10% to +30% accuracy.

“The Frontier project has been designed for up to four production trains, and that’s including Equinox as a satellite operation with a total capacity of 277,000 barrels per day of bitumen, costing an estimate of $22.9 billion,” Lindsay said.

The company also holds a 50% interest in several other oilsands leases in the area, including Lease 421. Teck has completed a seismic program on Lease 421 to help locate future drill holes. “Beyond that, exploration is ongoing, and we hope to be able to declare an initial contingent resource in the 2012 to 2013 timeframe,” Lindsay said. 

At presstime, Teck’s shares were trading down 3% at $41.58 apiece.