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UTS Energy, Teck Cominco plan new oil sands mine


March 26,2008

Reuters, 11:26am EDT 26-Mar-2008

CALGARY, Alberta, March 26 (Reuters) - Oil sands developer UTS Energy Inc (UTS.TO) and partner Teck Cominco Ltd (TCKb.TO) said on Wednesday they plan to develop a new oil sands mine capable of producing up to 160,000 barrels of tar-like bitumen a day.

The two companies, which each have 20 percent stakes in Petro-Canada's (PCA.TO) planned C$14.1-billion ($13.9 billion) Fort Hills oil sands project, said the proposed Frontier mine could be producing bitumen, a form of extra-heavy crude that requires upgrading, by 2015.

The new project would be in addition to a 50,000 barrel per day mine, called Equinox, the partners are planning on a property close to the Fort Hills site. Equinox could be operating by 2014, according to disclosure documents filed by the joint-venture partners.

No cost estimates for the two mines were given.

The two projects are the latest in more than C$100 billion in investments planned to exploit the oil sands region of northern Alberta, which contains reserves second only to Saudi Arabia's.

Separating the bitumen from the sand and upgrading it into refinery-ready synthetic crude is expensive and technically challenging. However, high oil prices are making exploiting the resource profitable and production from the region is expected to nearly triple to about 3 million barrels a day by 2015.

The two projects would not include an upgrader, but Wayne Bobye, chief financial officer at UTS, said their production might be processed at the Fort Hills project or shipped as is to refineries.

Teaming up with a U.S. refiner capable of handling the bitumen is also a possibility. "We're going to start to look at that in the next little while," Bobye said.

Similar deals have been done by EnCana Corp (ECA.TO) and Husky Energy Inc (HSE.TO) in which the two Canadian companies surrendered a share in their oil sands holdings in exchange for stakes in U.S. refineries. ($1=$1.02 Canadian) (Reporting by Scott Haggett; Editing by Peter Galloway)