Petro-Canada favors lower start-up volumes

It will be a tossup when Petro-Canada decides about mid-year how to stage construction of its Fort Hills oil sands project, said Chief Executive Officer Ron Brenneman. The first phase could be the originally planned 170,000 barrels per day, which offers economies of scale, or 100,000 bpd, which would be tied to Petro-Canada’s ability to execute in a high-cost environment, he said.

“At this stage we’re favoring the lower end,” he said.

But, for now, the Fort Hills partnership — Petro-Canada 55 percent, UTS Energy 30 percent and Teck Cominco 15 percent — is “working through the numbers, the engineering and the feasibility (studies). Until we get to mid-year, we’re not in a position to decide where that will come out,” Brenneman said.

The costs of building a 170,000 bpd mine and an upgrader have previously been estimated at more than C$10 billion.

However, final numbers will not be released until later this year and sanctioning won’t happen until 2008 when the final engineering work is completed.

Whatever start-up target is agreed on, Fort Hills is still due to start operations in 2011, tapping into reserves of about 4.7 billion barrels.

The eventual production goal is 340,000 bpd, consistent with a regulatory application for an upgrader near Edmonton to convert 340,000 bpd of bitumen into 280,000 bpd of synthetic crude. Brenneman also indicated there could be an early announcement on an auction of company oil sands leases that involve five in-situ properties with a combined 1.7 billion barrels of bitumen resource that UBS Securities expects will yield C$850 million to C$1.7 billion.

—Gary Park