Like all sources of unconventional oil, the Canadian oil sands are more expensive, more difficult and require more energy to extract than conventional oil. These issues have raised concerns about the industry's ability to develop the oil sands in a responsible manner. Statoil believes the environmental, social and economic issues facing oil sands development are difficult, but not impossible to overcome. By using the skill and expertise we acquired resolving some of the most challenging issues posed by developing the Norwegian continental shelf, we are working to advance oil sands science and expand our knowledge base.

Our involvement in the Canadian oil sands is based on clear economic facts, and a sound understanding of our company's technical ability.

Given rising world energy demand and declining reserves of conventional oil, the Canadian oil sands cannot and should not be ignored. They are the third-largest estimated proved oil reserve in the world, after Saudi Arabia and Venezuela. The oil sands contain proved reserves of 170 billion barrels of bitumen that are considered economically recoverable using present technologies.

Located in the province of Alberta, the oil sands are a huge, long-term investment opportunity in a politically stable, highly regulated environment. While still in the early stages of development, the oil sands already play a major role in meeting global energy demand, with production of 1.5 million barrels per day (bpd) in 2010.

Two billion barrels of recoverable oil

Statoil has a 60% interest in and operates facilities related to the Kai Kos Dehseh (KKD) oil sands leases, which comprise 1,129 square kilometres of land located in the Athabasca region of north-eastern Alberta. Purchased in 2007, our leases are estimated to contain more than two billion barrels of recoverable resources. We plan to eventually produce more than 200,000 bpd from these leases for the next 30 years or more.

Statoil entered into a partnership with PTT Exploration and Production (PTTEP), of Thailand, through the sale of a 40% interest in our KKD leases, with effect from 1 January 2011. PTTEP is aligned with Statoil's step-by-step approach to oil sands development, which involves testing new processes and technologies on a small scale at our Leismer Demonstration Project before initiating full-field KKD development.

Leismer is a dedicated, integrated research facility, constructed for research and development experiments to be conducted throughout the entire life of the plant. We are undertaking a mix of long and short-term projects in conjunction with Statoil's Heavy Oil Technology Centre (HOTC), in Calgary, and our heavy oil group in Norway. This work is also supported by the Canadian government's Scientific Research and Experimental Development programme.

Start-up and operations

Leismer reached an important milestone in January 2011 with the first commercial-scale bitumen production. Start-up took place safely and efficiently, with higher production than anticipated. Statoil has received approval from Alberta regulators to increase Leismer's licensed capacity to 40,000 bpd, and to produce another 40,000 bpd from a future steam-assisted gravity drainage (SAGD) project called Corner.

SAGD - the most common commercial method used to develop in-situ oil sands - involves drilling pairs of stacked, parallel wells vertically to reach the reservoir, and then horizontally across the reservoir. Steam is injected into the top well to heat the reservoir until the bitumen flows into the lower well and is moved to the surface. SAGD has a much smaller surface footprint than surface mining operations. Statoil has no oil sands mining plans at this time.

Technology and innovation

A technology-based company, Statoil believes research and innovation will result in new technologies and processes that will reduce the energy and water consumed by our SAGD operations. We are seeking a 25% reduction in the carbon dioxide intensity of our oil sands operations by 2020, and have a long-term ambition of a total 40% reduction in carbon dioxide intensity by 2025. We are also aiming for a 45% reduction in water intensity over the next 10 years. To accomplish this, Statoil has established a USD 30 million oil sands technology plan. This five-year plan identifies technologies and development strategies that will improve project economics while meeting our carbon dioxide and water intensity targets.

In response to concerns about cumulative effects of oil sands developments on biodiversity, Statoil has undertaken and supported a variety of research and monitoring initiatives to address habitat disturbance, and larger-scale, regional fragmentation of ecosystems. Most of this work has been related to regional wildlife populations, but we are also working to enhance biodiversity in reforestation and wetland reclamation projects.

Recognising the value of collaboration, Statoil helped to establish the Oil Sands Leadership Initiative (OSLI), a collaborative network of major oil sands companies that is committed to accelerating technology and innovation that will improve the environmental, social and economic performance of in-situ and mining development. With a budget of USD 25 million, OSLI has more than 50 joint venture projects under way. These projects are driven by employees from OSLI companies who sit on four working groups that meet regularly to map out potential areas of mutual interest.

At Statoil, our ambition is that every asset, every construction process and every operation crew involved in our oil sands operations, should be better than the previous one. Through our research and development work and collaborative efforts with industry peers and research organisations, we are committed to becoming an industry leader in environmentally and socially responsible oil sands development.