Petro-Canada May Stage Oil-Sands Project to Cut Costs

Petro-Canada May Stage Oil-Sands Project to Cut Costs

Petro-Canada, the third-largest oil company in Canada, may stage development of its Fort Hills oil- sands project to reduce labor costs, a company executive said.

Dividing the project into two parts could cut demand for workers to 8,000 from the 12,000 currently estimated, Neil Camarta, senior vice-president of oil sands for the company, told an energy conference in Banff, Alberta, sponsored by RBC Capital markets.

“Getting your crowd down by 4,000 people matters a lot,” Camarta said. While half of the site’s production could be pushed back by two years, “the upside is it’s a lot more bullet proof” on costs.

No final decision has been made on the project, he said.

Petro-Canada, which owns 55 percent of Fort Hills, has said it will release cost and size estimates for the multibillion- dollar development later this year. Production from the field has been estimated at as much as 170,000 barrels a day of extra-heavy oil by 2011.

Petro-Canada estimates it has more than 10 billion barrels of oil reserves from its oil-sands leases.

Rising costs are squeezing projects even as oil prices near $60 a barrel, or more than double the price five years ago. Demand has tightened labor markets and engineering and construction costs.

`Tough’ Projects

“These big projects, it’s as tough now as they were at $20 a barrel” of oil, Camarta said. “Folks seem to think we can give up more rent, between carbon taxes and royalties.”

The oil sands, 750 kilometers (466 miles) north of Calgary in the province of Alberta, are estimated to contain 175 billion barrels of recoverable oil, second only to Saudi Arabia’s 259 billion barrels, according to the Canadian Association of Petroleum Producers.

Imperial Oil Ltd., about 70 percent owned by Exxon Mobil Corp., is Canada’s largest oil company by 2005 sales, followed by EnCana Corp.

Shares of Petro-Canada were unchanged at C$42.65 at 12:45 p.m. on the Toronto Stock Exchange. The company’s shares have fallen 18 percent over the last 12 months.

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