BP Enters Canadian Oil Sands with Husky Energy

Major upgrade planned at US refinery for Canadian oil processing
BP announced today that it is moving into the Canadian oil sands by acquiring a half-share in the Sunrise field in Alberta operated by Husky Energy. At the same time Husky will acquire a half share in BP’s Toledo oil refinery in Ohio, US, between them forming an integrated North American oil sands business. Two independent 50/50 joint ventures will be formed from the equally valued assets to own and develop the businesses.
“Toledo and Sunrise are excellent assets. BP’s move into oil sands is an opportunity to build a strategic, material position and the huge potential of Sunrise is the ideal entry point for BP into Canadian oil sands,” said Tony Hayward, BP’s group chief executive. “In addition this deal will help guarantee a supply of advanced transportation fuels to major North American markets from Toledo which is a flexible and advantaged site.”
The Sunrise oil sands field is expected to be sanctioned in 2008 with first production of bitumen in 2012, building to 200,000 barrels of oil a day (bpd) by the end of the next decade with a 40 year production plateau. Sunrise, located in the Athabasca oil sands in northeast Alberta will be developed using steam assisted gravity drainage (SAGD), a tested technology which heats the bitumen within the reservoir allowing it to flow to the surface. The bitumen will be piped to Hardisty, Alberta, from where it will be transported via existing pipeline networks for refining. Sunrise will be operated by Husky as a Canadian oil sands partnership, based in Calgary.
Toledo Refinery’s crude distillation capacity is currently 155,000 bpd of which 60,000 bpd capacity is currently heavy oil. The refinery is located in one of the largest energy consumption regions of the US and, subject to necessary approvals and permits, will be expanded to process approximately 170,000 bpd of heavy oil and bitumen by 2015. It will be operated by BP as a US refining LLC.
“This transaction completes Husky’s Sunrise Oil Sands total integration with respect to upstream and downstream solutions,” said Mr. John C.S. Lau, President & Chief Executive Officer of Husky Energy Inc. “Husky is extremely pleased to be partnering with BP, a world class global E&P and Refining company.”

“The upstream and downstream joint ventures announced today will be investing billions of dollars to expand North American energy supply and enhance North American energy security,” said Bob Malone, chairman and president of BP America. “The result will be the development of a major new Canadian oil field and the modernization and expansion of the Toledo refinery to allow far greater use of Canadian heavy oil and to increase clean fuels production by as much as 600,000 gallons a day.”
Full regulatory approval of the proposed deal and final commercial agreements are expected to be completed in 1Q 2008, with a partnership effective date of 1 January, 2008.
BP has been advised by BMO Capital Markets.