Cost overruns on a major expansion to Syncrude’s oilsands operation have ballooned by more than $2 billion and it will take another year to get the upgrading facility operating, Syncrude’s owners say.
Syncrude Canada Ltd., which operates the joint venture of eight companies, estimates that the expansion near Fort McMurray will be completed in early 2006, rather than mid-2005.
The extended construction timeframe, plus engineering cost overruns at the start of the project, are expected to increase total capital costs to about $7.8 billion, compared with a fall 2002 estimate of $5.7 billion.
Canadian Oil Sands Ltd., which owns the largest share (about 32 per cent) of Syncrude, “is extremely disappointed in the extended completion outlook provided by Syncrude and surprised by the magnitude of the capital cost increase for the Stage 3 project,” says Marcel Coutu, Canadian Oil Sands’ president and CEO.
Canadian Oil Sands expects the project will cost it an additional $187 million in capital spending this year compared with original forecasts.
Syncrude Canada says the largest cost increases are due to the protracted engineering phase at the beginning of the project. The oilsands operator also underestimated the cost of revamping existing facilities and tie-ins.
Spending on the project to date totals $4.7 billion, which includes completion of a new mining component and about 37 per cent of the work finished on the upgrader facility.
A new, reorganized project-management structure is being put in place to oversee the project’s completion.
The project’s long-term economics remain sound, Canadian Oil Sands says. It will enable Syncrude to produce about 350,000 barrels a day (b/d) – including 124,000 b/d for Canadian Oil Sands – for at least 35 years.
