Production Begins at Exxon's Kearl Oil Sands Project

After major equipment transport and weather-related delays, production at the Kearl oil sands facility in Alberta, jointly owned by Imperial Oil and ExxonMobil , has finally commenced.

On Saturday, April 27, Kearl began producing mined bituminous crude oil from the first of three froth treatment trains, according to a press release by Imperial Oil.

The project, which is expected to produce some 4.6 billion barrels of recoverable oil over the next four decades, is one of Canada's biggest open-pit mining operations and has regulatory approval for producing up to 345,000 barrels a day.

Production at Kearl, located about 45 miles northeast of Fort McMurray in Alberta, is expected to reach 110,000 barrels per day once all three trains are operational later this year. By 2015, that figure is projected to double, according to a statement by ExxonMobil.

Imperial Oil, the project's operator, maintains a 71% interest, while ExxonMobil, which owns 70% of Imperial, holds the remaining 29% stake in the project.

A unique oil sands project
Kearl is unique in the sense that it has been designed to have a minimal environmental footprint. By contrast, most oil sands projects are generally characterized as detrimental to the environment, destroying vast swathes of boreal forest, using up massive amounts of water, and emitting greater quantities of greenhouse gasses than conventional methods of oil production.

Kearl, on the other hand, will use energy-saving cogeneration - a method that captures waste heat to simultaneously produce steam and electricity - to lessen greenhouse gas emissions. According to a 2010 report by IHS CERA, a leading global energy consultancy, Kearl's operations will have lifecycle greenhouse gas emissions comparable to similar operations in the U.S.

The project will use a proprietary paraffinic froth treatment technology that removes fine clay particles and water from bitumen so that the end product can more easily be transported via pipeline. Kearl is also the first oil sands mining operation that doesn't use an upgrader, a facility that converts bitumen into salable synthetic crude oil.

It will also feature other environmentally beneficial innovations, including "on-site water storage to eliminate river withdrawals in low-flow periods, progressive land reclamation, earlier tailings reclamation than other oilsands operations and a state-of-the-art waterfowl deterrent system," according to a company press release.

Though many oil sands operators have suffered due to depressed prices for Western Canadian crude oil, Kearl's operators have ways to surmount that challenge. They plan to transport Kearl's output to their own refineries and are also looking into purchasing railcars to get around the issue of limited pipeline capacity from Alberta.

Limited pipeline capacity is not only an issue for Alberta's oil sands producers, but also for operators in U.S. shale plays such as the Bakken. Over the next several years, improvements in pipeline infrastructure will be a defining trend in North America's energy landscape - one that astute investors would be wise to follow. Enterprise Products Partners, the nation's largest publicly traded energy partnership, is at the forefront of this trend and is investing heavily in pipeline infrastructure that will serve the nation's energy companies for decades into the future. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool's brand-new premium research report on the company.

The article Production Begins at Exxon's Kearl Oil Sands Project originally appeared on

Motley Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.