Brian Zinchuk is editor and owner of Pipeline Online
This is the Meota West 2 SAGD facility run by Strathcona Resources, near North Battleford. Photo by Brian Zinchuk
By Brian Zinchuk
CALGARY, MEOTA – In recent days, Strathcona Resources Ltd. has made some blockbuster announcements. First on May 14 it announced it has sold its Montney business for $2.84 billion and bought the Hardisty Rail Terminal. The following day it announced its intention to commence a takeover bid to acquire Meg Energy Corp.
Strathcona has grown substantially in recent years, in part due to its developments north of North Battleford, in the Edam and Meota areas. The company’s most recent corporate presentation lays out plans for an expansion of 48,000 barrels per day (bpd) of capacity in the region, mostly there, but also near Fusilier, SK, at a site called Plover. The stated intention was to complete these by 2030.
If successful, Strathcona alone would account for one third of the Government of Saskatchewan’s stated goal of attaining 600,000 bpd oil production by 2030, up from the current approximately 450,000 barrels per day.
So the big question is – will Strathcona continue its planned expansion in Saskatchewan, or will its growth be through buying barrels of production through the acquisition of MEG instead?
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On May 23 Pipeline Online spoke in depth about this to Ryan Tracy, Strathcona’s President, SCR Lloydminster Thermal. The company has four presidents who look after its various business units.
Tracy wished to focus principally on the plans for Saskatchewan thermal assets, as opposed to the MEG offering, and his answers reveal the company still intends on building out its ambitions plans on this side of the border.
Strathcona’s Saskatchewan thermal facilities include Edam, Meota West 1 and 2, Meota East and a small thermal facility at Plover.
Strathcona’s Edam central processing facility. Photo by Brian Zinchuk
Tracy spoke of the company’s long range plans, or LRP.
“We’re planning our growth projects that we know we can execute over the next five years that will meet our economic hurdles,” he said.
The company’s plans include approximately 6,000 bpd increase in production at the Meota West 2 facility in 2025, followed by two new central processing facilities (CPFs) at Meota Central 1 and 2, each capable of 12,000 bpd, in 2026 and 2029 respectively. At Plover, the pilot expansion in 2026 is expected to add 2,000 bpd. A full commercial buildout at Plover will add another 16,000 bpd in 2028.
“Our Meota Central project, is the first phase of this growth. It is now well underway. Drilling has started on the first pad of wells, the rig is on location drilling right now. We have the facility modules in fabrication in Airdrie, by the end of summer we will have quite a few of these modules completed. They’ll start heading out to location at the tail end of this year to our main Central Processing Facility out at Meota Central. This project is on budget and on schedule, this is the first big step in the growth plans for our Lloyd thermal growth”.
Tracy continued, “Infrastructure, drilling completions, power, water and the CPF, all in, that cost is for 12,000 barrel day facility, we’re seeing at roughly $370 million.”
He added that’s similar cost per flowing barrel as their previous four projects.
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Their initial facilities were 6,000 bpd design. Doubling their standard size leads to efficiencies which help offset inflation, Tracy explained.
First oil at Meota Central is anticipated in Q4 of 2026.
The company is looking at 75,000 bpd by 2030 from their northwest Saskatchewan thermal projects. Put in perspective, Saskatchewan currently produces about 450,000 bpd province-wide.
Strathcona Meota East SAGD facility. Photo by Brian Zinchuk
CO2 and pressure maintenance
Strathcona’s Nov. 13, 2024 Investor Day Presentation notes, “Strathcona is progressing towards the sanction of its first CCS project at Meota East in mid-2025, which is expected to be ~100% funded by the CGF partnership and Federal ITCs.”
A funding partnership was signed with the federal government in July 2024.
So far detailed Front-End Engineering and Design (FEED) studies have begun with two engineering, procurement and construction (EPC) firms. The company is targeting completion mid-2025. The final EPC contract likely to be largely fixed-price, turnkey, their presentation noted.
On the permitting side, subsurface CO2 sequestration rights have been awarded by Saskatchewan government. Right-of-way for a minor sequestration pipeline has been acquired and a townhall with local stakeholders is completed.
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On the regulatory side, Strathcona is awaiting clarity from Saskatchewan government on royalty implications.
So far the company is not currently doing any CO2-enhanced oil recovery in his area of Lloydminster Thermal. But they do non-condensible gas injection, typically methane, to manage pressures on mature wells.
They consume all of their produced associated gas in their boilers to generate steam and purchase gas for injection. Some of that injected gas is recycled back for fuel gas.
“Once your steam chamber has reached the top of your pay, and you’re starting to lose heat to the overburden, you start replacing that steam with gas, because you don’t need energy anymore. You just need pressure maintenance,” Tracy explained.
Strathcona’s Hamlin rail facility. Photo by Brian Zinchuk
Crude-by-rail
The company’s ace in the hole is the rail facility built at the end of a rail spur at Hamlin, north of North Battleford. That spur leads to the CN Mainline which runs through North Battleford. Regarding the rail facility, he said, “All of our barrels in our Lloydminster Thermal assets primarily go to our Hamlin rail facility and other rail facilities in the area. We have a small amount of barrels that go through pipe.”
To date, the most they shipped is 40,000 bpd, with 37,000 bpd more common.
“There may be some expansion we have to do at Hamlin later on,” he said, when asked about the planned growth for the area.
The crude-by-rail shipments go to the US Gulf Coast. Strathcona’s shipments are able to go by rail without diluent, a substantial saving versus heavier oils. “The good thing about our current Hamlin facility, we have a local rail terminal already, and we send it undiluted. We never have to blend it with lighter oil or any kind of condensate or diluent, so it stays undiluted. It’s a very stable product, and we can ship that on our rail cars down to our buyers in the Gulf. And they pay a bit of a premium because there is no dealing with diluent in those barrels. So that’s an advantage we have using rail over pipeline.”
At the other end of the rail, there’s a specific facility built to unload their cars.
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Clearly the company’s crude-by-rail experience has been a positive enough affair to purchase the Hardisty Rail Terminal.
In its May 14 press release, the company said, “Also in the first quarter of 2025, Strathcona signed a definitive agreement to acquire the Hardisty Rail Terminal (HRT) for cash consideration of approximately $45 million and closed on the acquisition early in the second quarter. HRT, located in Hardisty, Alberta, is the largest crude-by-rail terminal in Western Canada with capacity of 262 Mbbls/d and year-to-date throughput of approximately 50 Mbbls/d. HRT is directly connected to the Hardisty Diluent Recovery Unit, an innovative facility which separates diluent from raw bitumen prior to rail transportation, allowing for a competitive netback for upstream producers versus pipeline alternatives.
“HRT has an estimated replacement cost of approximately $200 million and free cash flow over the past twelve months of approximately $12 million, 80 per cent of which is underpinned by long-term take-or-pay contracts with an investment grade counterparty. Together with Strathcona’s Hamlin Terminal, Strathcona now owns and operates rail terminals servicing approximately 80 per cent of the total current crude-by-rail volumes in western Canada, allowing for meaningful economies of scale.
“The HRT acquisition is a continuation of Strathcona’s countercyclical acquisition strategy focused on core area consolidation. While HRT is only 19 per cent utilized today, it has been up to 82 per cent utilized historically during periods of tight pipeline egress, providing Strathcona with a natural hedge against future egress bottlenecks.”
The addition of the Hardisty Rail Terminal will place it relatively close to the company’s planned Plover expansion as well as its conventional heavy oil plays near Macklin.
We like heavy oil
Tracy said, “We like heavy oil, and we like SAGD. And that’s what we’re doing in our expansion plans in Saskatchewan.”
He added, “The Saskatchewan government has been excellent to work with. I think we have a bit of a Saskatchewan advantage with the great governments that we’ve dealt with in the province of Saskatchewan.”
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Editor’s note: Strathcona’s plans are discussed in the speech in the story below