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Uncertainty hits oil sands Syncrude Canada budget overrun causes jitters in pipeline sector, but privately owned OPTI Canada able to raise C$1.5B for joint venture with Nexen Gary Park Petroleum News Calgary Correspondent
The aftershocks from the earthquake that shook Syncrude Canada’s expansion project have rattled other oil sands proponents.
But not everyone has been affected by the fallout that forced the giant consortium to warn that a 100,000-barrel-per-day expansion could finally cost C$8.1 billion, double the initial estimate in 2001.
Privately owned OPTI Canada posted an impressive success by raising C$1.5 billion, just C$200 million short of what it needs to fund its 50 percent share of the Long Lake joint venture with Nexen.
OPTI, a subsidiary of Ormat Industries, an Israel power technology company, said March 15 that it raised C$750 million from existing shareholders and institutional investors in Canada, the United States, Australia and Europe.
It also negotiated C$800 million in credit from three Canadian banks, TD Bank, Scotiabank and Royal Bank.
That sets the stage for construction to start mid-year on Long Lake, which is expected to produce 72,000 bpd in 2007 and double that in 2011.
OPTI also said it filed a preliminary prospectus with securities regulators in February and plans to have its shares listed on the Toronto Stock Exchange.
The results confirmed the belief among OPTI executives that Syncrude Canada’s stumble would not drive investors away from the oil sands. OPTI said it has taken steps to ensure Long Lake is completed on schedule and on budget. Backlash elsewhere However, others have tasted a backlash.
Petro-Canada oil sands Vice President Brant Sangster was challenged by investors at a Toronto symposium March 8, who are concerned that the Syncrude Canada overrun will cost Petro-Canada C$235 million to cover its 12 percent stake in the operation.
Sangster explained that oil sands costs have soared because engineering contractors have based their forecasts on projects in the U.S. Gulf of Mexico, not the vastly different environment of northern Alberta.
He said estimates have been made before the engineering work is completed and suggested the Alberta government could help by compiling project-management information, without disclosing the identity of the sources.
The uncertainty spawned by Syncrude Canada could affect eventual production from the oil sands and undermine plans for pipelines from northern Alberta to the British Columbia coast, said Rich Ballentyne, president of Terasen Pipelines.
He told the Financial Post that the Syncrude Canada woes could deter investment in the oil sands and delay plans to build pipelines, warning that if Syncrude is having trouble controlling its budget newcomers such as Canadian Natural Resources and Nexen could face tough challenges.
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