* Sets 2021 output target of 500,000 bpd
* Says to cut exposure to natural gas
By Scott Haggett
CALGARY, Alberta, June 6 (Reuters) - Cenovus Energy Inc (CVE.TO) said on Monday it will accelerate development of its oil sands and conventional oil properties, targeting output of half a million barrels per day within 10 years.
Cenovus, Canada’s No. 2 independent oil producer, said it plans to spend between C$3 billion ($3.06 billion) and C$3.5 billion per year over the next decade to reach its goal.
Along with accelerated expansions of the Foster Creek and Christina Lake oil sands projects shared with ConocoPhillips (COP.N), Cenovus will boost output at its conventional oil properties in Alberta and Saskatchewan to as much as 130,000 barrels per day by 2016 from 70,000 currently.
“We now have five phases at Foster Creek and three at Christina Lake operating with design capacity of 178,000 barrels per day. We have regulatory approval in place for projects under construction to get to about 440,000 barrels per day of operating capacity on a gross basis” said CEO Brian Ferguson. “We also plan to continue to advance development of our other oil properties in ... Alberta and Saskatchewan.”
Cenovus’s had previously targeted oil sands production of 300,000 bpd by 2019. Now it expects to produce 350,000 bpd from its northern Alberta properties by that point.
The company will boost the size of three planned expansions at its Foster Creek property to 35,000 bpd from 30,000 bpd. It said production from its Foster Creek site will eventually reach up to 290,000 bpd, up from a 235,000 bpd target. It is also raising the size of future expansions at Christina Lake.
The tar-like bitumen the company produces from its steam-driven oil sands project is to be upgraded at refineries in Wood River, Illinois, and Borger, Texas that Cenovus co-owns with ConocoPhillips. However, the joint-venture’s output will exceed the processing capacity of the two refineries by 2014.
Cenovus said it will then have to seek other options for upgrading, possibly tweaking operations at the two refineries to boost capacity or finding partners in new markets.
“We’ll also be looking at transportation arrangements,” Ferguson said in an interview. “For example we could get more volumes down into the (Gulf of Mexico) coast ... but right now we are not in any discussions with a Gulf Coast refiner.”
Ferguson also said a company with refining assets might be potential joint-venture partner. Cenovus is currently seeking another partner to speed development of its wholly owned properties and said companies from around the world have shown an interest in teaming up. It expects to select its new partner by year end.
The increase in oil output will also lower Cenovus’ exposure to weak natural gas prices. It expects natural gas to provide only 5 percent of operating cash flow in 2021 from 20 percent in 2011.
Cenovus plans to hedge up to 75 percent of its natural gas output to protect its cash flow and capital program, but expects to cut the amount of oil it hedges in coming years.
Shares of the Calgary, Alberta-based company fell 75 Canadian cents to C$34.21 by midafternoon. (Additional reporting by Aftab Ahmed in Bangalore; editing by Janet Guttsman)