Looking for a new route? as costs at Fort Hills look set to rise by an estimated 50%
Fort Hills rethink as costs balloon by 50%
Operator Petro-Canada is taking a closer look at costings for the C$26 billion (US$24.2 billion) Fort Hills oil sands development in Alberta after the preliminary results of a front-end engineering and design study suggested the project's price tag may rise by as much as 50%.
The major increases are costs associated with construction materials, labour, project management and engineering, Petro-Canada said in a statement.
However, Petro-Canada and its partners, UTS Energy and Teck Cominco, said in a statement they remain committed to the development.
Company boss Ron Brenneman said: "We've seen a dramatic rise in capital costs in the past year.
"Once our FEED work is done, we will develop our definitive cost estimate. This will be the basis for our final investment decision (expected in the fourth quarter of 2008)."
He said that the trio will now look at a range of options to reduce or defer capital costs.
The development, as currently conceived, consists of an integrated oil sands mine and bitumen extraction plant 90 kilometres north of Fort McMurray, and an upgrader in Sturgeon County north-east of Edmonton, Alberta.
It is expected to produce 140,000 barrels per day of synthetic crude when its first phase is completed in 2011, rising to 280,000 bpd by 2015, when all phases are done.
Petro-Canada, which operates the project, has a 60% stake, with the the remaining 40% split between UTS and miner Teck Cominco.