Higher Development Cost Of Fort Hills Oil Sands Project Will Not Deter Canadian Consortium

Calgary, Alberta (AHN) - Soaring prices have caused the Fort Hills oil sands project in Calgary to escalate in development cost by over 50 percent to $23.8 billion.

Preliminary estimate in June 2007 placed the project cost for the first phase at $14.1 billion. The first phase consists of a mine, located 90 kilometers north of Fort McMurray in Alberta, and an upgrader at the northeast of Edmonton.

The mine's cost had increased to $13.9 billion, while the upgrader jacked up to $9.9 billion, disclosed UTS Energy, which owns 20 percent of the development.

The consortium which will develop Fort Hills is made up of UTS, Petro-Canada which holds a 60 percent stake and Teck Cominco Limited with the balance of 20 percent share.

Despite the higher cost, UTS president and chief executive officer Will Roach said the firm is committed to the project. "We believe Fort Hills is an attractive project and it's got great potential to create shareholders value. It's a four-billion barrel resource and in a mature stage of development," Roach said in a conference call with analysts.

The soaring project cost was attributed to increases in capital cost, higher construction materials, labor, project management and engineering bills.

According to plans, the first phase would produce 140,000 barrels daily of synthetic crude oil. Initial bitumen production is slated by late 2011 and output from the upgrader is projected to start by mid-2012.