January 21, 2010 / 5:36 PM / 8 years ago

UPDATE 1-Canadian Natural moves ahead with oil sands plans

* To announce Horizon expansion plans late this year

* Sees Horizon pumping reliably at 110,000 bpd by mid-year

* Expects to sanction Kirby by year-end

CALGARY, Alberta, Jan 21 (Reuters) - Canadian Natural Resources Ltd (CNQ.TO) expects to move forward with two major oil sands projects this year, extending a string of recent developments in the sector as industry conditions improve with higher oil prices and falling costs.

John Langille, vice-chairman of Canadian Natural, the country’s largest independent oil explorer, said the company aims to announce by the end of this year how it will proceed with the expansion of its Horizon oil sands project in northern Alberta.

The first phase of Horizon, which started producing synthetic crude from mined oil sands last year, should be pumping reliably at its 110,000 barrel a day design rate by the middle of 2010, after start-up pains are ironed out, Langille said.

Long-term plans call for output of about 250,000 barrels a day at the project.

“In 2010 we will look at all the methods of execution to get to that level,” he told investors at a conference in Whistler, British Columbia. “And I think, hopefully by the end of 2010 ... we’ll be at a point where we’ll sanction the next expansion, and what terms that will be and how we’ll go about it, and the size of it, etcetera.”

The first phase of the project cost C$9.7 billion ($9.2 billion) to build, following several overruns as the Alberta construction scene became overheated with companies rushing to develop oil sands projects.

The situation eased when billions of dollars of developments were put on hold or canceled in late 2008 and early 2009.

Now, companies are taking their proposals back off the shelf. This week, projects proposed by ConocoPhillips (COP.N) and Total SA (TOTF.PA), as well as Husky Energy Inc (HSE.TO) and BP Plc (BP.L) have moved forward.

Langille said Canadian Natural is also preparing to sanction its Kirby oil sands project in northeastern Alberta by the end of this year and aims to start spending money on it in 2011.

Unlike Horizon, Kirby is a steam-assisted gravity drainage project, whereby Canadian Natural will pump steam into the earth to loosen the tar-like bitumen, allowing it to be pumped to the surface in wells.

Kirby, which still requires regulatory approval, would produce 45,000 barrels of bitumen a day.

“We’re into our final stages of engineering to get a firm handle on our costs,” he said.

Such developments were not hit with the same magnitude of inflation and construction delays as the mining projects, he said.

Canadian Natural shares were up 15 Canadian cents at C$71.78 on the Toronto Stock Exchange. They are up 58 percent in the past 12 months.

$1=$1.05 Canadian Reporting by Jeffrey Jones; editing by Rob Wilson

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