Osum Oil Sands Corp.
Advancing a junior into an industry’s unrealized opportunity
Steve Spence jokes that when he left a senior management position with oil and gas giant Royal Dutch Shell plc after 24 years with the company to join Osum Oil Sands Corp. in 2008 he had to pitch in to make coffee, along with dozens of other tasks, for what was then a start-up.
Now that start-up, along with fellow junior Laricina Energy Ltd., is tracking towards making oilsands history. This summer, the partners received regulatory approval for the first project to produce bitumen from carbonates on a commercial scale, a major milestone along the path to unlocking a massive resource that has evaded the industry for decades.
Spence, who became president and chief executive officer of Osum in 2010 after serving as vice-president of projects for two years, says the company plans to make its mark in the carbonates while developing more conventional oilsands assets.
“We are the third-largest landholders in the carbonates. We think it has enormous potential and will make us a substantial producer,” he says, adding that the private firm’s strong investor base positions it well for the future. “I sleep well at night,” he jokes.
For the oil industry veteran—who had joined Shell after receiving a degree in chemical engineering from the University of British Columbia and held a number of management positions with the energy giant, including a four-year assignment in the 1990s when he worked in Australia with Shell’s joint-venture partner Woodside Petroleum Ltd.—joining an oilsands-focused company like Osum felt natural.
“I joined Shell right out of school as a reservoir engineer involved mostly in unconventional oil plays in Canada, including things like the Midale [enhanced oil recovery] project in Saskatchewan,” Spence says.
That project is now owned by Apache Corporation and is one of two successful enhanced oil recovery projects in southern Saskatchewan where CO2 is injected to recover crude from legacy projects and subsequently sequestered. In addition to Midale, Spence also oversaw Shell’s heavy oil assets in Saskatchewan.
That experience served him well when he returned to Canada from Australia, where he was assigned to oversee Shell’s oilsands and heavy oil assets in the Peace River region. He also was responsible for overseeing Shell’s Orion steam assisted gravity drainage (SAGD) project near Cold Lake, which the company acquired through its purchase of junior BlackRock Ventures Inc. in 2006. It was that oilsands involvement with Shell that played a role in Spence making the jump to Osum.
Osum had acquired, mostly through Crown land sales, 30 sections of oilsands leases in the Cold Lake area, which now constitute the location of its planned Taiga SAGD project—a foundation for growth that is designed to en- able commercial carbonate expansions. Osum received regulatory approval for the phased 45,000-barrel-per-day installation last September, and initial production is expected in 2016.
“Taiga gives the company a strong base in an area that is well under- stood,” Spence says.
But, as significant as it is, he adds that it only scratches the surface of Osum’s potential. In addition to the Taiga asset and Saleski, the carbon- ates project Osum shares 40/60 with Laricina, in early 2013 the company filed the environmental impact as- sessment for Sepiko Kesik (Cree for “blue sky”), a phased 60,000-barrel- per-day thermal installation targeting bitumen carbonates.
In total, Spence estimates Osum has the potential to eventually produce as much as 500,000 barrels per day, including volumes from its joint venture with Laricina.
He would seem not to be alone among those who see Osum’s potential. Last November, Rick George, former president and chief executive officer of oilsands megaweight Suncor Energy Inc., agreed to become chairman of Osum’s board of directors.
Spence says he has long admired the way George took Suncor from an unprofitable oilsands miner to become one of the giants of Canada’s oil and gas industry.
“Rick is a wonderful person to work with. There’s not much in the oilsands he doesn’t know.”
While Spence is confident in Osum’s investor base, he acknowledges the challenges producers are currently experiencing raising capital—which it will need to achieve its own goals. He says the company is waiting for more receptive investment markets, at which time it will announce another private placement.