EnCana changes upgrader tune

CALGARY -- EnCana Corp. might eventually build an upgrader to process future oil sands production, the company's chief executive officer said yesterday, but the current focus remains on signing on partners to do the job.

"One of the things we will be considering . . . is at least one longer-term upgrader solution in Western Canada," EnCana CEO Randy Eresman said yesterday at a conference in New York, in a comment published by Reuters News Agency.

The statement is a marked shift for EnCana, which has insisted it didn't make sense to build an upgrader in Alberta, even as its competitors, such as Canadian Natural Resources Ltd., are building their own multibillion-dollar facilities in the Fort McMurray region.

Still, an EnCana upgrader likely won't emerge until it pursues the development of its third oil sands asset, dubbed Borealis.

The company's projections indicate it will be into the next decade before that project is in production.

More immediately, EnCana plans this month to announce one or more partners to process output from its Foster Creek and Christina Lake oil sands properties.

The company has said it could swap a stake in the oil production for a stake in a refinery that would process the crude. Another potential option is to get more natural gas assets in North America -- EnCana's core business -- in exchange for some of the company's oil sands holdings.

Two Calgary sources have said the company has narrowed a long list down to two finalists.

An EnCana spokesman wouldn't comment.

Marathon Oil Corp., a Houston-based refiner, and BP PLC, which has major refineries in the United States and major gas assets, are believed to be the front-runners.

Negotiations for a similar deal with refiner Valero Corp. fell apart last December.

EnCana stock has benefited from investor interest in its oil sands plans even as natural gas prices have been weak.

While gas is still down about 60 per cent from its peak last December, EnCana stock is up almost 30 per cent since a 52-week low six months ago, even though about 80 per cent of the company's production is gas.

On the Toronto Stock Exchange yesterday EnCana shares closed down $2.42 or 4.1 per cent at $56.91.

The company hopes to eventually produce 500,000 barrels a day from the oil sands.

Desjardins Securities said in an Aug. 31 report that the partnership announcement could disappoint some investors because it likely won't be for the whole 500,000 barrels.