Devon sees enough oil sands refining capacity

By Jeffrey Jones

NEW YORK (Reuters) - Devon Energy Corp. (DVN.N: Quote, Profile, Research, Stock Buzz) is satisfied there's enough available processing capacity for its oil sands-derived crude, so it has no need to seek a corporate transaction with a U.S. refiner, its president said on Thursday.

Devon, the biggest U.S. independent oil explorer, is starting up the first phase of its Jackfish oil sands development in northeastern Alberta, a 35,000 barrel a day project. Last September it applied to build the second stage.

Pipeline firms like Enbridge Inc. (ENB.TO: Quote, Profile, Research, Stock Buzz) keep expanding their capacity to take blended heavy crude to the U.S. Midwest and beyond, Devon President John Richels told the Reuters Global Energy Summit.

"And frankly we're seeing a lot of interest in the U.S., and particularly the Midwest, by refiners to provide upgrading capacity as they start to have less and less light sweet conventional crude," Richels said.

In addition, upgrading capacity is set to expand in Canada with several merchant plants planned for Sturgeon and Strathcona counties just outside Edmonton, Alberta, Richels said.

Gooey, high-sulfur crude wrung from Canada's oil sands must be upgraded at such plants into lighter oil before refineries can use it as a feedstock to make gasoline.

Big developers like EnCana Corp. (ECA.TO: Quote, Profile, Research, Stock Buzz) and Husky Energy Inc. (HSE.TO: Quote, Profile, Research, Stock Buzz) have acquired interests in the U.S. refining sector to secure a market for their future output.

At the Reuters Summit on Tuesday, Petro-Canada (PCA.TO: Quote, Profile, Research, Stock Buzz) Chief Executive Ron Brenneman said a U.S. refinery deal was not in the cards for his company because it is converting its own refineries to run more heavy oil.  Continued...