Syncrude project partners revise cost, schedule for Stage 3 expansion

By OGJ editors
HOUSTON, Mar. 10 -- Joint venture partners in the Syncrude oil sands mining operation in Fort McMurray, Alta., operated by Syncrude Canada Ltd., have reported a delay in the construction schedule of the project's Stage 3 expansion as well as a significant increase in the expansion's capital cost estimates.

Canadian Oil Sands Ltd., the largest stakeholder in the project, said, "The best current estimate from Syncrude is that the project will reach mechanical completion in early 2006, rather than mid-2005, and be in service by mid-2006." The extended completion date is expected to increase total capital costs to about $7.8 billion (Can.) compared with the $5.7 billion estimate made in September 2002.

Marcel Coutu, Canadian Oil Sands president and CEO, commented, "Canadian Oil Sands 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. Significant reorganization and forward plans are being implemented as a result of this new information.

"It is only fortuitous that this setback is occurring during a period of robust crude oil prices, which may prevail for some time and should help Canadian Oil Sands continue to fund much of its share of this project from cash flow," Coutu said.

Over the past few months, Syncrude reported it has been assisted by numerous independent experts and from the project management ranks of Syncrude's owners in reassessing the status of Stage 3. "Many of these project management specialists now will be introduced into a newly reorganized project management structure to oversee the completion of Stage 3," it said.

Syncrude noted that, "the largest capital cost increases stem from the protracted engineering phase at the beginning of the project and the underestimation of revamping existing facilities and tie-ins, which together have overshadowed the relatively stronger productivity of the green field components of the construction."

To date, Stage 3 expenditures total about $4.7 billion, which include the completion of the Aurora 2 mining train and about 37% completion of construction for the upgrader expansion, with the purchase of materials, modules, and equipment more than 90% complete.

Syncrude's Stage 3 expansion includes the development of the Aurora 2 mine and the addition of a third, 100,000 b/d fluid coker. Stage 3 also includes facilities to improve the quality of Syncrude's total site production, which will be increased to about 350,000 b/d on project completion.

Syncrude Project partners are Syncrude Canada Ltd., Imperial Oil Resources, Canadian Oil Sands LP, Canadian Oil Sands Ltd., ConocoPhillips Oilsands Partnership II, Mocal Energy Ltd., Murphy Oil Company Ltd., Nexen Inc., and Petro-Canada Oil & Gas.

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