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January 28, 2011

Oil News Roundup - Hess Plans in the Bakken, oilsand news and 2010 US crude oil production back up to 2003 level

1. Hess Corp. produced 20,000 boe/d from North Dakota’s Bakken oil play as of yearend 2010, and it expects to double production there by yearend 2011

Hess plans to more than triple its Bakken crude output in the next five years to 80,000 barrels a day from the current 25,000.



Hess Corp. is building a rail station that will give it the ability to ship 130,000 barrels of crude a day from the Bakken fields, according to Wynne Harvey, senior manager of crude oil marketing at the New York-based company.

Greg Hill, president of Hess worldwide exploration and production, said the company plans to invest $1.8 billion, or 33% of its 2011 budget, on drilling and associated infrastructure to boost Bakken production to 40,000 boe/d.

John Hess, chairman and chief executive officer, forecast the company’s 2011 production could average 425,000 boe/d compared with 420,000 boe/d in the fourth quarter 2010, up from 415,000 boe/d for the fourth quarter 2009.

The company reported 2010 fourth-quarter net income of $58 million, or 18¢/share, compared with $358 million, or $1.10/share, for the same period last year.

2. US crude oil production at the end of 2010 was 5.616 million barrels per day. This is a level not seen in the US since October, 2003.

3. Oilweek - The technologies that made the shale gas revolution possible are beginning to have a similar impact in the light and conventional oil sector, which can now develop reservoirs that could not be exploited until energy prices and new technologies made production economic

First came the revolution in natural gas production - the shift to shale gas which, by bringing huge new stores of natural gas into the market drove prices down and made it necessary to fundamentally restructure Canada´s gas-prone petroleum sector. Now comes the revolution in the oilfield. Ironically, the same technologies that made shale gas possible are enabling the industry to begin the restructuring that the shift to shale gas made necessary.

4. Norway's Statoil aunched oil sands production at a demonstration facility in Canada one month ahead of schedule. The first phase of operations for the Leismer demonstration project is approved to produce 10,000 barrels of oil per day. Capacity could reach 18,800 bpd within two years pending approval by the Alberta government. Oil will start shipping from Leismer in late 2011.

Statoil's lease is in the oil-rich area of Athabasca in northeast Alberta. The next phase of operations in the region could bring another 40,000 barrels of oil sands per day on stream

5. The federal-provincial panel ruled in favour of the company’s controversial bid to build the Joslyn North mine, about 70 kilometres north of Fort McMurray. Total expects to begin operating the $7-billion to $9-billion mine in 2017, and is planning to produce 100,000 barrels per day. It is the 9th oilsands mine.

Joslyn will add to a fast-growing oil sands industry that already produces 1.9 million barrels per day. According to data gathered by Strategy West Inc., Fort McMurray-area mines produce 1.1 million barrels today; mines with another 940,000 have also been approved, not including Joslyn.

In total, Alberta has given the thumbs-up to 2.2 million barrels [per day] in projects that have yet to pump oil. Companies have proposed a total of 8.2 billion barrels.

6. Investment in Alberta's oilsands is set to reach a whopping $180 billion over the next decade, peaking at 20 per cent more than was spent during the height of the last boom, according to Peters & Co.

Strong and sustained oil prices in the $75 to $90 US per barrel range and increased interest from deep-pocketed foreign investors such as state-owned PetroChina and France's Total are leading the charge in renewed interest in the resource, the Calgary-based investment house said.

Total capital spending in the oilsands industry will hit a high of $22 billion in 2014 as thermal, mining and upgrading projects break ground

Other analysts anticipate even larger investments, with BMO Capital Markets forecasting $20-billion worth of investment in the oilsands this year.

The financial house estimates investment in Alberta's oilsands will peak at $29.9 billion by 2015.

7. Suncor Energy Inc. reported today that the company's oil sands production during December averaged approximately 323,000 barrels per day (bpd). The company achieved its oil sands production target for 2010 with annual production averaging approximately 283,000 bpd.

Production numbers include upgraded sweet and sour synthetic crude oil and diesel, as well as non-upgraded bitumen sold directly to the market, from all Suncor-operated facilities. Reported volumes do not include Suncor's proportionate production share from the Syncrude joint venture.

Suncor said new spending plans will help it hit an oil sands production growth target of 10% per year over the next 10 years.

Suncor said it plans to increase production to more than 1 million b/d of oil equivalent by 2020 and see company-wide production growth of about 8% each per year to 2020.

Suncor also said it has approved a C$6.7 billion capital spending plan for 2011, with more than 40% of the budget targeted at growing its oil sands operations.

The spending plan is up 28% from the capital expenditure budget for 2010, and is the first step in the company's plan to increase its oil and gas production to more than 1 million boe/d by 2020, Suncor said in a statement.

Suncor said its overall target production for 2011 is 550,000-600,000 boe/d, prior to divestiture of about 37,000 boe/d of output. Figures were not given for Suncor's current production, but output in the fourth quarter of 2009 was pegged at 638,200 boe/d.

Suncor said its output target for oil sand production was 280,000-310,000 boe/d for 2011.

Suncor said the majority of its growth spending will be directed toward expansion of its Firebag oil sands facilities. Stage 3 is targeted to begin production in the second quarter of 2011 and ramp up to 62,500 b/d of bitumen over 24 months.

In the second half of the year, construction will begin on Firebag Stage 4, with a completion target of 2013 and target capacity of 62,500 b/d.

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