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Occidental invests in oil-sands project

June 24, 2008|From Bloomberg News

Occidental Petroleum Corp. said Monday that it was buying a stake in a major Canadian oil-sands project and had signed 30-year agreements with Libya's national oil company to upgrade its existing oil contracts.

Westwood-based Occidental agreed to buy Enerplus Resources Fund's 15% interest in the Joslyn oil-sands lease in Alberta for $491 million to capitalize on Canadian production.

The acquisition represents 370 million barrels of recoverable oil reserves, Occidental said. The company said it expected to spend $2 billion to develop the reserves "over a number of years." The transaction is expected to close by the end of the third quarter.

"Occidental has not had anything in Canada for years and this is a foothold for them," said Pavel Molchanov, an analyst in Houston for Raymond James & Associates Inc. who rates the shares a "strong buy" and owns none. "It's an investment in low-risk oil assets for a company that has always liked oil."

Oil accounts for about 80% of Occidental's production, according to company data. Joslyn, in Alberta's Athabasca oil-sands region, may contain 8 billion barrels of tar-like bitumen, Occidental said. The project is 85% owned and operated by French oil giant Total.

Occidental said it expected mining of the Joslyn sands, to begin in 2014, to yield it 11,000 barrels a day from its interest, rising to 31,000 barrels a day.

In Libya, an investment of about $5 billion during the next five years will cause production to triple to 300,000 barrels a day, Occidental said.

Occidental left Libya when the U.S. imposed sanctions in 1986.

Shares of Occidental rose $1.97 on Monday to $87.61.

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