Southern Pacific shipping dilbit by rail

Southern Pacific Resources Corp. said rail shipments have begun of diluted bitumen (dilbit) produced at its STP-McKay thermal oil sands project in Alberta to a terminal in Mississippi as production at the project ramps up (OGJ Online, Oct. 11, 2012).

The first shipment of dilbit left the Lynton terminal south of Fort McMurray on Dec. 22, 2012, and arrived in Mississippi on Jan. 6 for offloading at the Genesis Natchez terminal, where Southern Terminal has exclusive capacity. With steady shipments under way, the company plans to build storage before starting sales to Gulf Coast refiners at the end of January.

While developing the rail transport program last year, Southern Pacific said the system would provide pricing advantages and lower diluent requirements (OGJ Online, June 28, 2012).

Average December production at the STP-McKay project, 45 km northwest of Fort McMurray, in December was estimated at 1,200 b/d of bitumen, up 22% from the previous month. Production began in mid-October and is expected to reach 12,000 b/d.

Southern Pacific said it is converting steam-assisted gravity drainage well pairs from steam circulation to production cautiously to assure long-term integrity of wellbores and optimize recovery. So far it has converted seven of 12 wellbores to production. Others are in various stages of circulation.

The company has begun drilling exploratory coreholes to delineate land north of the project area. It expects to have drilled 10-13 holes by the middle of March.

Depending on results, Southern Pacific said, the program might support additional expansion or be integrated with planned expansions for which it has applied for regulatory approval. Those project are a 6,000-b/d expansion of the first phase and an 18,000-b/d second phase.