If anyone is looking for Lucien Yehuda Bronicki and Yehudit Bronicki, Ormat Industries’ controlling shareholders and managers, he will have to go to Canada, where the couple is staying. Last night, the Bronickis signed an agreement to set up a $1 billion joint venture in Canada with global energy company Nexen.
OPTI Canada, Ormat’s Canadian sub-subsidiary, this morning announced the joint venture for producing and upgrading crude oil. OPTI and Suncor Energy own in equal parts a crude oil field in the Long Lake project. In the past, the two companies have set up a facility for upgrading crude oil (bitumen). Now that the facility is in operational order, Nexen will join in as Ormat’s partner for oil production.
Ormat estimates that the Long Lake project will produce 35,000 barrels of bitumen a day. The bitumen production will be based on steam-assisted gravity drainage (SGAD) technology. The company expects to double the field production in later stages, when the SGAD technology is applied.
The bitumen produced in this project and from other fields in the region will be upgraded through a technology developed by Ormat (the OrCrude technology). OPTI will be in charge of planning, setting up and operating the upgrading facility, and the Canadian partner will be responsible for planning, setting up, and operating the production process through the SGAD technology.
The launching of the first project is due to be completed by 2006. $1 billion will be invested in the project. OPTI’s share, estimated at $500 million, will be financed by its own capital and by loans.
The agreement also gives OPTI a 50% holding in 32 plots in another oil field in Athabasca in the north of the Alberta province in Canada. The field has potential for crude oil production and upgrading.
Under the agreement, OPTI gave its Canadian partner a license to use the OrCrude upgrading technology, currently being demonstrated in an experimental facility that is producing 500 barrels a day. The facility, set up in Canada by OPTI, has been operating since April. Under the agreement, the Canadian partner has an exclusive license to use the OrCrude technology in specific areas in Athabasca, Canada, and a non-exclusive license to use the technology in other parts of the world under the terms stipulated in the agreement.
Nexen is a global energy company whose value is estimated at $2.5 billion, and operates in the oil and natural gas markets. The company operates in Canada, the US, Yemen, Nigeria, Australia, Colombia, Indonesia, and Brazil.
OPTI is developing a technology for converting heavy crude oil into light synthetic oil. The technology enhances the exploitation of heavy crude oil. There are large quantities of non-exploited heavy crude oil around the world. Ormat has already invested $12 million in OPTI, and the present investment is supposed to change OPTI’s status from an R&D company to a manufacturing company.
Ormat’s latest venture was set up after the company announced at the beginning of the month that it had bought six geothermal power stations in the US for $41 million. Ormat recently estimated that the acquisition of the geothermal power station would increase the company’s annual revenue from its power stations to $90-100 million a year as of 2002. This will create the critical mass necessary for the company to become profitable.
It appears that after the Ormat management got its fingers burnt in Kazakhstan, it prefers to expand its presence in the North American market. Following the purchase of the power stations in the US, the US market will represent 45% of the company’s turnover in 2002.
Published by Israel's Business Arena on 31 October, 2001