UPDATE 2-Husky Energy ups price tag of Sunrise oil sands project to C$3.2 billion

Thu Oct 23, 2014 2:25pm EDT
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(Recasts to focus on Sunrise costs going up, adds detail on Sunrise, updates share price)

By Nia Williams

CALGARY, Alberta Oct 23 (Reuters) - Canada's No. 3 integrated oil and gas producer Husky Energy Inc raised cost estimates on its new Sunrise oil sands project by nearly 19 percent to C$3.2 billion as it reported third quarter earnings on Thursday.

First production from the northern Alberta project, operated by Husky as a joint venture with BP Plc, will also be delayed.

Husky Chief Operating Officer Robert Peabody said steaming is expected to start at Sunrise by the end of 2014. Previous guidance was for first oil to be achieved by then.

Sunrise will be an in situ project, in which steam is injected into underground reservoirs to liquefy bitumen so it can be pumped to the surface. Production will be ramped up to 60,000 barrels per day over two years.

Husky management did not go into details about the revised estimate, other than to attribute it to increasing "cost pressure around the central facilities".

Rob Symonds, senior vice president of Western Canadian Production at Husky, first warned costs could rise at an investor day in June.

Although most analysts were expecting Sunrise costs to go up, some warned it would disappoint investors.   Continued...