Imperial to go ahead with C$8 bln Kearl project

By Scott Haggett

CALGARY, Alberta (Reuters) - Imperial Oil Ltd (IMO.TO) on Monday said it would go ahead with its C$8 billion ($7.1 billion) Kearl oil sands project, the first major new development to be approved in the region of northern Alberta since the recession forced a spate of cancellations.

Imperial, Canada's biggest oil exploration and refining firm, said it expects to complete the mining project's first 110,000 barrel per day stage by late 2012.

"It's a big project and it's a high-quality oil sands resource," said Gordon Wong, a spokesman for the company. "It's a very exciting day for Imperial."

Future expansions could boost production from the site north of Fort McMurray, Alberta, to 300,000 barrels a day.

Imperial, 69.9 percent owned by supermajor Exxon Mobil Corp (XOM.N), was widely expected to proceed with Kearl despite an industry downturn that forced the cancellation of at least C$90 billion worth of rival projects.

However, Imperial has been relatively unscathed by the economic turmoil that has pushed oil prices from their July 2008 high of more than $147 a barrel to a recent $61.25. The company is debt free and had nearly C$2 billion in cash on hand at the end of 2008.

Alberta's oil sands contain more than 170 billion barrels of recoverable crude but the resource is technically difficult and expensive to extract.

The tar-like bitumen stripped from the sand must also be upgraded before it is usable. Most major projects include upgraders to turn the bitumen into refinery ready synthetic crude but Imperial plans to sell the bitumen directly to refineries.