Just nine months after construction began on its new, $10.8-billion Horizon oilsands mine, Canadian Natural Resources Ltd. has revealed plans to potentially spend another $20 billion to double the size of the huge energy project and build an upgrading refinery onsite in northern Alberta.

Canadian Natural, already one of Canada's largest natural gas and heavy oil producers, said the two new expansion phases at the Horizon mine could boost production to 488,000 barrels per day (b/d) of crude within the next 12 years and cost at least another $10 billion.

The company expects that adding an upgrader, estimated to cost a further $6 billion, will allow it to capture $10 US a barrel that is currently lost because heavy oil fetches lower prices on world markets than light crude.

As well, Canadian Natural expects to spend about $1.4 billion adding a "gasification" unit to its oilsands plant that would allow the company to stop relying heavily on natural gas, which is a major expense in the oilsands as the cost for the commodity has more than quadrupled in recent years. It will also spend extra money incrementally increasing its steam-assisted oilsands wells.

"What they've done here is essentially laid out what is probably closing in on $20 billion worth of expenditures over the next 10-12 years," said Martin Molyneaux, a Calgary-based energy analyst with FirstEnergy Capital.

All told, the major expansion plans will make the Horizon oilsands development one of the largest and most expensive projects ever built in Canada.

"Today, we have the assets, the people and the balance sheet to make the modifications of this long-term plan not only doable, but realistic," president Steve Laut told analysts in a conference call.

The major scope changes to Canadian Natural's project came as the Calgary-based energy company reported a 51-per-cent drop in third-quarter profits to $151 million, or 28 cents a share, from $311 million, or 58 cents a share, last year.

The earnings shortfall was due to a $430 million after-tax hedging loss and $135 million stock-option liability.

But the company also posted record cashflows of $1.4 billion - up one third over last year - and record production of about 572,000 barrels of oil equivalent output per day (boe/d).

"With another record year close to behind us, I continually recognize that we have a strong asset base and a strong core of technical, operational and financial expertise to unlock the value of those assets as well as the balance sheet capacity to finance development," chairman Allan Markin told analysts.

"I remain very excited about the prospects for Canadian Natural," said Markin.

As part of its change in strategy, Canadian Natural (TSX:CNQ) is looking at combining the second and third phases of Horizon to have production of 232,000 b/d by 2011 - one year ahead of the current plans.

After gaining final board approval to proceed with Horizon in February, Canadian Natural expects to be 16 per cent completed on its first stage by yearend.

The company will also boost next year's Horizon spending by $400 million to speed up the completion date and take advantage of short-term lull in mega-projects planned for the Fort McMurray region of northern Alberta.

Canadian Natural also hopes to have a gasification plant in place and operational by 2013, which it hopes will significantly lower production costs by using part of the bitumen as fuel instead of costly natural gas.

Phase 4 is targeted to bring 125,000 more daily barrels on stream by 2015 and Phase 5 will add 140,000 barrels by 2017 - totalling just under half a million b/d from one facility.

Canada's current oilsands production recently just passed one million barrels per day, but is expected to nearly triple in the next decade.

"I think Canadian Natural's confidence just keeps on gaining momentum as they get further and further along with Horizon," said FirstEnergy's Molyneaux.

"They realize that one of the questions that all institutions are asking these companies is: 'What are you doing to redeploy all the cashflow?' "And they're one of the few that can say: 'Well, we now know where 40 to 50 per cent of our cashflow is going to go to for the next decade at least.'" Along with its aggressive oilsands development plans, Canadian Natural continues to increase production from its conventional Canadian natural gas and oil properties, as well as its offshore facilities in the North Sea and West Africa.

In 2006, the company expects to increase production by 10 per cent to upwards of 632,000 boe/d.

Capital spending will rise nearly 40 per cent next year to about $6.8 billion across the company.