June 6, 2011 / 10:46 AM / 7 years ago

UPDATE 2-Cenovus Energy ups output target for next 10 years

* Sets 2021 ouput target of 500,000 bbls/d

* Says to cut exposure to natural gas (Adds details, background)

June 6 (Reuters) - Cenovus Energy Inc raised its output forecast for the next 10 years as it expects regulators to approve new oil sands projects by 2015 and said it plans to lower its natural gas output in the coming years.

Natural gas prices NGc1 have slumped to trade just over $4 per million British thermal units (mmBtu), from its 2008 levels of $13 per mmBtu.

Canada’s No. 2 independent oil producer said natural gas is expected to provide only 5 percent of the company’s operating cash flow in 2021 from 20 percent in 2011.

Cenovus plans to hedge as much as 75 percent of its natural gas output to protect its cash flow and capital program , but expects to cuts the amount of oil it hedges in the coming years.

T he company expects significant near-term growth in conventional oil . It expects output from operations such as Pelican Lake, Weyburn, southern Alberta, Saskatchewan Bakken and Lower Shaunavon to rise to 120,000 - 130,000 b arrels per day (bbls/d) by the end of 2016 from about 70,000 currently.

With oil prices CLc1 now around $100 a barrel, investments are flowing back into the oil sands of northern Alberta, which boast the largest crude deposits outside the Middle East.

Cenovus, which is best known for its steam-driven oil sands projects in Alberta, now expects to produce about 350,000 barrels per day by 2019, compared with its earlier target of 300,000 bbls/d. The company set a production target of 500,000 bbls/d by 2021.

The company is working to have 400,000-500,000 bbls/d net of oil sands projects approved by regulators by 2015, it said in a statement.

The company has capital investment plans of about C$3.0-C$3.5 billion for the decade, the company said in a statement.

“The technology modifications and breakthroughs being developed by our staff are expected to result in improved project economics,” said Chief Executive Brian Ferguson said.

New technology for taking heavy bitumen from the sand is less expensive than older methods, and operators are now less inclined to build expensive upgraders that convert the tar-like extract for transport to refineries.

Shares of the Calgary, Alberta-based company closed at C$34.96 on Friday on the Toronto Stock Exchange. (Reporting by Aftab Ahmed in Bangalore; Editing by Jarshad Kakkrakandy)

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