Husky Energy looks to increase oil output at Rush Lake, Sask. project

Husky Energy has sanctioned Rush Lake 2, a new 10,000 barrels per day (bbls/day) heavy oil thermal development in Saskatchewan, as it continues to advance its resilient portfolio of low sustaining capital projects.

The company's heavy oil thermal production is expected to reach about 80,000 bbls/day by the end of 2016, from about 18,000 bbls/day in 2010.

Rush Lake is about 33 kilometres east of Swift Current.

"Rush Lake 2 is yet another project in a high-return portfolio that is profitable even at today's low oil prices," said CEO Asim Ghosh. "These developments are key in our transition to a low sustaining cost business. Supported by the Lloydminster thermal value chain, we capture incremental value from production and realize the upgrading and refining margins, further strengthening our resilience."

The Rush Lake 2 thermal project builds on a proven template of heavy oil thermal developments in the Lloydminster region and is anticipated to start up in late 2018. Construction is currently under way at three thermal projects scheduled to begin production next year and resources are expected to be directed to Rush Lake 2 as that work is completed.

These bite-sized projects use a highly standardized and modular approach to development. Husky achieves cost savings and efficiencies in engineering, module fabrication, construction and ongoing operations.

Husky has an unmatched land and infrastructure position in the Lloydminster region and the thermal value chain is designed to extract incremental value from its heavy oil thermal production. The value chain includes the Saskatchewan gathering system, Lloydminster Upgrader and asphalt refinery, oil storage capacity at Hardisty and the Company's strategically located refinery in Lima, Ohio.

At the Lima Refinery, the Company is proceeding with the initial stages of a crude oil flexibility project designed to improve reliability at the facility and allow for the processing of up to 40,000 bbls/day of heavy crude feedstock from Western Canada.

The project allows Husky to further balance its upstream production and downstream capabilities. This capital efficient investment, compared to a new build facility, will allow the refinery to swing between light and heavy crude to achieve the best margins. The project is expected to be completed in stages over the next three years.

"The margin-based Downstream business further improves Husky's resiliency in a low oil price environment by mitigating exposure to oil price differentials," said Ghosh.