Korea National Oil Corporation (KNOC), the state oil company, said yesterday that it has awarded a contract to GS Engineering & Construction to build an oil sands refining facility at the BlackGold Oil Sands Block in Alberta, Canada.
The facility will be constructed in two stages, with the first stage to cost 360 billion won ($300 million) and expected to be completed by 2012. The plant will be operated by Canada’s Harvest Energy Trust, which KNOC bought last October in a $1.7 billion deal.

In the first stage, the facility will be able to produce up to 10,000 barrels a day of synthetic crude oil from bitumen, while the second stage will boost the production up to 30,000 barrels a day.

The contract agreement for the first-stage facility will be signed between KNOC and GS Engineering & Construction next month, with the groundbreaking to take place in October.

The deal is expected to provide an entry for Korean companies into the Canadian oil and gas market.

“The oil sands business has been an unfamiliar sector for Korean businesses,” said Chang Moo-ik, the senior executive vice president of the plant business division at GS E&C. “With the experience gained from this project, we will enter this market as demand is increasing due to the rise in oil prices.”

The BlackGold Oil Sands Block is estimated to have a total of 2.6 million barrels in reserves.

The bitumen is extracted from underground with steam assisted gravity drainage (SAGD) technology, which is commonly used in the oil sands industry in Alberta.

KNOC acquired the leases to the BlackGold Oil Sands Block from the U.S.-based Newmont Mining Corporation in August 2006.

Meanwhile, KNOC told Reuters that it remained in talks with Dana Petroleum, a British oil and gas explorer, on a takeover bid valued as high as $2.1 billion, denying rumors that the talks had collapsed.

Dana has oil reserves in the North Sea and North Africa. KNOC wants to gain oil reserves in Europe and Africa after securing a foothold in North America with the acquisition of Harvest as its seeks to double Korea’s oil reserves.

Source: JoongAng Daily

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