Marathon in Hunt for Canadian Oilsands Partner


Athabasca Oil Sands
(Click to Enlarge)
NEW YORK, Nov 1, 2006 (Dow Jones Newswires)

Marathon Oil Corp (MRO) expects to detail soon the formal process through which it intends to secure a partner in Canada's rich Athabasca oilsands, company executives said this week.

Marathon wants to move forward in its quest for a Canadian oilsands partner, senior vice president of business development David Roberts said Tuesday in a post-earnings conference call with analysts.

"We're going to make an announcement on the process that we're going to use to get to an end game" in the coming days, Roberts said, adding that Marathon would favor an integrated "reserve-to-products" venture.

"Marathon is well positioned to provide the downstream solution to a number of Canadian providers," Roberts said.

Houston-based Marathon is the fourth-largest U.S.-based integrated oil and gas company and the fifth-largest U.S. refiner. It owns seven refineries in Illinois, Michigan, Ohio, Kentucky, Minnesota, Texas and Louisiana.

Marathon spokeswoman Angelia Graves confirmed the company's near-term intent to detail the process being used to evaluate an arrangement that would link Marathon's refineries to a Canadian oilsands partner, but she declined to specify a timeframe.

"We see something coming soon that explains the process," she said Wednesday.

Among touted partners is Canadian Natural Resources (CNQ), which Merrill Lynch said is a "logical partner" for Marathon.

The Canadian company's Horizon oilsands project in Alberta contains more than 6 billion recoverable barrels of bitumen, according to the company's Web site. It released third-quarter earnings Wednesday and will host a conference call with analysts at 11 a.m. EST.

"Marathon could bring much-needed capital - Horizon is expected to cost nearly $C11 billion ($9.8 billion) when factoring in multiple phases - access to advantaged refining capacity in PADD II (the Midwest) and a top-tier marketing platform," Merrill Lynch said in a note to clients.

Marathon was rumored to be among the potential partners in talks for an oilsands joint venture with EnCana Corp. (ECA) before the Canadian producer struck a deal with ConocoPhillips (COP) in October.

Roberts, Marathon's senior vice president of business development, told analysts in the third-quarter earnings conference call: "We're going to make an announcement on the process that we're going to use to get to an end game" in the next few days. He added that Marathon would favor an integrated "reserve-to-products" venture.

"Marathon is well positioned to provide the downstream solution to a number of Canadian providers," he said.

Merrill Lynch said that while Marathon indicated many options were under consideration, it would not be surprised if the outcome is similar to ConocoPhillips and EnCana's partnership, whereby "Marathon would stake an ownership claim to 50% of Horizon's production/economics while Canadian Natural Resources would record 50% of the partnership's downstream volumes and related economics".

Copyright (c) 2006 Dow Jones & Company, Inc.

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