UPDATE 2-Koch seeks buyers for Canadian oil sands assets

Thu Jun 7, 2012 5:07pm EDT

* Six properties on offer, with est. 8 bln bbls in place

* Properties in Alberta, bids due Aug. 9

* Joins other offerings from Conoco, Shell

By Jeffrey Jones

CALGARY, Alberta, June 7 (Reuters) - Koch Industries' Canadian energy division has put interests in several Alberta oil sands properties on the auction block, adding to a growing list of opportunities for developing the massive resource being shopped to potential bidders.

Koch Oil Sands Operating ULC is offering stakes in six properties comprising 220,000 net acres, with total bitumen in place estimated at more than 8 billion barrels, according to Western Divestments, the financial adviser for the offering.

The recoverable resource potential is pegged at 2.9 billion barrels, which could put the overall value of the assets in a range between C$900 million and more than C$3 billion ($890 million and more than $2.9 billion), depending on the quality and proximity to other holdings, FirstEnergy Capital Corp analyst Michael Dunn said.

However, Koch did not specify what percentage it might offer in the assets.

They include properties in the Cold Lake, Mackay, Firebag, Muskwa, Namur and Pelican Lake regions of Alberta, the western Canadian province whose oil sands resources represent the world's third-largest crude deposit.

"Just to generalize, the leases would be worth the most to those who are next door to them," Dunn said. Those operators could be interested in adding to their own acreage, he said.

Western Divestments said the assets could eventually produce more than 300,000 barrels a day.

Koch officials were not immediately available to comment on the plans.

U.S. billionaire Koch brothers, known for their support of conservative causes, own the company and are longtime players in Canada's energy sector.

In oil sands, Koch last made headlines in 2003 when it decided against going ahead with a mining project called Fort Hills after years of study and engineering work, balking at the C$3.5 billion cost. That holding is now owned by Suncor Energy Inc and Total SA.

The sale process comes as Canada's energy sector gears up for massive investments in oil sands and in the pipelines that would carry the supplies to markets in the United States, Eastern Canada and the Pacific coast for shipment to Asia.

This week, the Canadian Association of Petroleum Producers, the industry's main lobby group, said it now predicts oil sands production will double to 3.1 million barrels a day by 2020.

U.S. democrats who oppose TransCanada Corp's $7.8 billion Keystone XL pipeline to Texas from Alberta have said the Kochs, whose company also has U.S. refining operations, would be big beneficiaries of the controversial project.

Koch's offering follows other oil sands properties onto the market, including a multibillion-dollar package of assets owned by ConocoPhillips, said to be of interest to India's Oil and Natural Gas Corp, and a smaller holding from Royal Dutch Shell called Orion.

Asian companies, especially those from China, have been among the most enthusiastic foreign investors in oil sands operations in recent years.

Koch's properties would be designed for steam-assisted gravity drainage projects, where, instead of mining, the bitumen is pumped to the surface with the aid of steam.

One of them, the Cold Lake property, has regulatory approval for a 10,000 bpd steam-assisted project and a 1,200 bpd demonstration phase, according to the sales material. It has development potential of 55,000 bpd, it said.

Bids are due by Aug. 9, said Moya Little, president of Western Divestments. Confidential data on the properties will be available by the end of June, she said.

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