Petro-Canada tots up Fort Hills costs
Petro-Canada said it would stagger the start-up of components of its Fort
Hills oil sands projects in Alberta in a bid to keep the cost of the
venture, now put at C$14.1 billion ($13.2 billion), under control.
Petro-Canada and its partners at Fort Hills are struggling with a shortage of
local labour and surging materials costs as the international oil industry
rushes to develop Alberta's oil sands region.
The first phase of the project, will produce 140,000 barrels per day of
refinery-ready oil by the second quarter of 2012. A second stage with lift
output to 280,000 bpd by 2014, the company said today.
Investors had been anticipating the cost estimate and design plan for months
as the company agonised over ways to avoid the big delays and cost overruns
that have plagued the oil sands industry throughout this decade.
Petro-Canada operates the Fort Hills project with a 55% stake in it. Its
partners are Teck Cominco with 15%, and UTS Energy with 30%.
The partners' all-in costs for both phases could hit more than C$26 billion,
Petro-Canada said today.
Construction will peak around the end of the decade, about the same time that
demand for heavy building trades in Alberta is projected to be at its height
at nearly 40,000 workers.
"We're up against some tough competition and this is the picture that keeps me
awake at night," Reuters reported Neil Camarta, head of Petro-Canada's oil
sands division, as saying. "But we've put a lot of thought into how to
manage around this."
The partners aim to start selling 160,000 bpd of raw bitumen from the Fort
Hills mine north of Fort McMurray, Alberta, in late 2011. It would complete
the plant that will upgrade the bitumen into synthetic oil half a year
later.
The upgrader will be near Edmonton, Alberta, where Petro-Canada operates a
refinery it is retooling to run oil sands-derived crude exclusively.
The staggered approach is aimed at preventing the two parts from competing
with each other for tradespeople, Camarta said.
Also, the company could attract as much as half its work force from outside
Alberta and even Canada, he said.
The price for the first phase does not include C$1.1 billion worth of
engineering work that will proceed for the next 12 months before the
partners make a final decision on whether to go ahead with the project.
At about C$100,000 per barrel a day of production, the first phase of Fort
Hills is in the mid-range of previous expectations and in line with a
current expansion of Anglo-Dutch Shell's nearby Athabasca development.
More than $100 billion worth of projects are under way or planned in Canada's
oil sands as oil companies race to grab a piece of one of the few huge
resource opportunities in a politically stable country.
Petro-Canada shares were up 58 Canadian cents at C$55.90 on the Toronto Stock
Exchange today day. UTS rose 14 Canadian cents to C$6.08 and Teck Cominco
climbed 13 Canadian cents to C$46.07.
28 June 2007 09:33 GMT
| last updated:
28 June 2007 17:59 GMT
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