Petro-Canada defers decision on Fort Hills mine
By Scott Haggett
CALGARY, Alberta (Reuters) - Petro-Canada said on Monday it will delay a final go-ahead for the mining portion of its planned C$21 billion ($17 billion) Fort Hills project, looking to the weak economy and falling oil to lower overheated costs that have plagued rival oil sand ventures.
The company, Canada's No. 4 integrated oil exploration and refining firm, said it will not make a decision on proceeding with the mine until next year, instead of December as initially promised, because it expects costs to decline as oil sands projects fall by the wayside.
"We can take advantage of the softening market to sharpen our pencils and drive the costs down," Neil Camarta, Petro-Canada's senior vice-president, oil sands, said on a conference call. "This is a big undertaking and we need to take the extra time to get it right."
As well, Petro-Canada, which holds a 60 percent stake in the Fort Hills project, confirmed it has decided to hold off building an expensive upgrader to process the 160,000 barrels a day of tar-like bitumen the mine will produce,
That should shave about C$10 billion off the project's enormous costs, which by last September had climbed 50 percent in less than a year.
SPATE OF DELAYS
Now, with Petro-Canada's decision, every major integrated oil sands project that includes an upgrader has either been delayed or deferred as producers await higher oil prices or lower costs.
Most analysts estimate that projects need oil prices near $100 a barrel to make a decent profit. However recession fears and the credit crunch have pushed oil below $60, after it topped $147 in July. Continued...