Petro-Canada Releases Updated Cost Information for the Fort Hills Project

Petro-Canada Releases Updated Cost Information for the Fort Hills Project

Petro-Canada, the operator and a 60% owner of the Fort Hills Project (Project), along with its Partners in the Fort Hills Energy Limited Partnership, said today that the preliminary results of the Front-End Engineering and Design (FEED) work suggests that estimated costs for the Fort Hills Project have risen considerably. The Project, as currently conceived, consists of an integrated oil sands mine and bitumen extraction plant 90 kilometres north of Fort McMurray, Alberta and the upgrader in Sturgeon County, northeast of Edmonton, Alberta.

The Fort Hills Partners remain fully committed to the Project and are assessing these preliminary estimates and a range of options to reduce or defer capital costs.

While both the preliminary cost data and the Project scope are still under review, initial indications suggest that the estimated capital costs for the Project, as currently conceived, have increased in the range of 50% from those announced when the Partners approved the Design Basis Memorandum for the Project in June 2007.

“We’ve seen a dramatic rise in capital costs in the past year,” said Ron Brenneman, Petro-Canada’s President and Chief Executive Officer. “Once our FEED work is done, we will develop our definitive cost estimate. This will be the basis for our final investment decision.”

The major increases are costs associated with construction materials, labour, project management and engineering.

The Fort Hills Partners are discussing options for development of the Project, including the phasing of various aspects of the Project. Selected options are expected to be reflected in the final FEED outcome. Once FEED work is complete, Fort Hills will develop a definitive cost estimate, which will be the basis for the final investment decision planned by the Fort Hills Partners for the fourth quarter of 2008.

Proceeding with the Fort Hills Project is also subject to certain regulatory approvals being received. Fort Hills is working with the regulators and various stakeholders to obtain the necessary approvals.

The first phase of the Project, as currently conceived, is planned to produce 140,000 barrels per day (b/d) of synthetic crude oil. Associated bitumen production is expected to be about 160,000 b/d. First bitumen production is expected to begin in the fourth quarter of 2011, with first synthetic crude oil production from the Sturgeon Upgrader anticipated in the second quarter of 2012. The Fort Hills project is expected to produce up to a total of 280,000 b/d of synthetic crude oil by 2015, once all phases are complete.

Petro-Canada is one of Canada’s largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally. Its common shares trade on the Toronto Stock Exchange under the symbol PCA and on the New York Stock Exchange under the symbol PCZ.

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