CALGARY, Alberta (Reuters) - Husky Energy Inc (HSE.TO), Canada’s No. 3 integrated oil company, said on Monday its 60,000 barrel per day Sunrise oil sands project, now under construction, will cost C$2.7 billion ($2.72 billion), 8 percent above previous estimates.
Husky, controlled by Hong Kong billionaire Li Ka-shing, did not say the why the cost of the Sunrise project, a joint venture with BP Plc (BP.L), was on the rise but said 85 percent of the costs of the northern Alberta project, slated to open in 2014, are now fixed.
The increase is modest by the standards of Alberta’s oil sands, the world’s third-largest crude oil reserve. Rising material costs, weak planning and a tight supply of skilled labor have added billions of dollars to the costs of some large-scale projects.
Analysts said the cost increase was minor and less than some had expected.
“This is the first overrun announced to-date and a fairly small one relative to what we have seen out of other projects,” Menno Hulshof, an analyst at TD Securities, said in a research note.
Husky also said it expects to produce 310,000 to 330,000 barrels of oil equivalent per day (boepd) in 2013, up from an expected average for this year of 301,000 boepd.
The 2013 forecast includes a planned decrease in natural gas production and an increase in more profitable light, medium and heavy oil output.
“For 2013, I would fully expect Husky to maintain its ongoing focus on conventional heavy oil development, which includes the typical cold heavy oil production from western Saskatchewan and eastern Alberta,” Macquarie analyst Chris Feltin said.
The company, known for its Husky and Mohawk-branded gas stations, said its Pikes Peak South and Paradise Hill heavy oil projects in Saskatchewan were producing above their designed capacity.
Husky has chopped dry gas development spending and, like numerous other producers, is concentrating on gas prospects that offer higher-value liquids opportunities, Husky Chief Executive Asim Ghosh said earlier this year.
Overall, the company said it expects to spend C$4.8 billion in 2013, C$100 million more than its expected outlay this year. It is targeting annual production growth of between 5 and 8 percent through 2017, up from its previous target of 3 to 5 percent.
Husky shares were up 8 Canadian cents at C$27.98 late on Monday morning on the Toronto Stock Exchange.
Reporting by Scott Haggett and Maneesha Tiwari in Bangalore; editing by Sofina Mirza-Reid; and Peter Galloway