UPDATE: Petro-Canada: Fort Hills Oil Sands Mine Costs Fall
28 Abril 2009 - 11:33AM
Dow Jones News
Estimated costs for Petro-Canada's (PCZ) delayed Fort Hills oil
sands mine have sunk 30% to below C$10 billion, the company's chief
executive Ron Brenneman said Tuesday.
The savings from the earlier estimate of "C$14 billion and
change" reflect lower global steel prices, less escalation in wage
rates and better labor productivity amid the slowdown in the oil
sands, Brenneman said on a conference call.
"It's a pretty rough estimate but it's pretty encouraging...that
even on a standalone basis we can generate a double-digit return
[with oil prices] at $60 a barrel," he said.
Petro-Canada, which owns a 60% stake in Fort Hills, has also cut
estimated operating costs for the project, Brenneman said. UTS
Energy Corp. (UTS.T) and Teck Cominco Ltd. (TCK) each hold 20%
apiece.
Petro-Canada is currently being taken over by Suncor Energy Inc.
(SU), which would create Canada's biggest energy company with a
major presence in Alberta's vast oil sands, the world's biggest
crude reserve outside Saudi Arabia.
Plans for the Fort Hills oil sands development originally
incorporated the mine and an upgrading facility, which would
process the sludgy oil sands bitumen into a higher-quality
synthetic crude. But in September, estimated costs for the combined
project soared more than 50% to top C$28 billion, forcing the Fort
Hills partners to delay the mine while they worked to bring down
costs.
The upgrader has been put on hold indefinitely and will likely
be scrapped, as Suncor already operates two upgraders and has
delayed plans for a third.
Separately, Brenneman reiterated that Petro-Canada is
"comfortable" with its 60% stake in the project, following news
that French oil major Total SA (TOT) has withdrawn its hostile bid
for UTS.
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669;
hyunyoung.lee@dowjones.com