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Canadian bitumen project award goes to WorleyParsons

WorleyParsons (ASX: WOR), an engineering and professional services provider to the oil and gas, mining and environmental infrastructure industries, announced the award of a C$387 million (approximately AU $400 million) contract to design and build the field facilities for the Mackay River Commercial Project Field. The project is based in north eastern Alberta, Canada.

The award is for the first stage of the project, which when completed will produce 35,000 barrels of bitumen per day. Further stages are planned, which are estimated to bring total production to 150,000 barrels per day. WorleyParsons Cord, the company’s subsidiary construction firm, will carry out the work.

The award is in conjunction with its consortium partner CPECC Canada, which is a subsidiary of PetroChina. The Chinese oil and gas company originally was in a joint venture with a Canadian oil and gas company until 2012, when the Canadian partner exercised its option to sell its 40% stake in the project to the Chinese company.

By geographical segment, the company’s largest share of revenue comes from its Canadian operations, making up 29% of the $8.81 billion in total revenue in 2013.

The development of bitumen oil sands and shale oil projects in North America is creating a renaissance of energy production, so much so that natural gas spot prices have been driven down from about $13/mmbtu (million british thermal unit) to about $3.70/mmbtu currently.

Presently, Qatar is the world’s number one natural gas producer, with Australia projected to take the first place spot around 2020. Many gas projects in and around Australia were planned and started before the sudden glut of supply and lower demand, so their profit projects will have to be revised for when they are producing in a sub $5/mmbtu world.

BHP Billiton (ASX: BHP) has bought into shale oil development sites in the US, and it said in August that it will be expanding them further. The world’s biggest miner projects that global commodity demand for shale oil and gas with rise by 75% over the next 15 years.

Foolish takeaway

For years people spoke of “peak oil” fears — that the world’s oil supply will eventually dry up — but now that has been put to one side as one alternative source after another have been found, and can now by commercially feasible to produce.

Regardless of how much the commodities are sold for eventually, companies like WorleyParsons will always be needed at the beginning of these projects to get the infrastructure in to do the job. The company is well diversified over the various continents, and doesn’t just specialise in one particular customer industry, so it can keep business stable overall.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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