StatoilHydro withdraws plans for Canadian bitumen upgrader

StatoilHydro has dropped plans to develop a $16 billion (Can.) bitumen upgrader in Alberta because of soaring costs, poor global economic conditions, and a lack of legislative clarity.

Uchenna Izundu
International Editor

LONDON, Dec. 5 -- Norway's StatoilHydro has dropped plans to develop a $16 billion (Can.) bitumen upgrader in Alberta because of soaring costs, poor global economic conditions, and a lack of legislative clarity.

The announcement joins a growing list of major energy infrastructure proposals that operators are delaying or cancelling as economic conditions deteriorate and oil prices fall. Royal Dutch Shell PLC has postponed a planned expansion of the Athabasca Oil Sands Project and the 100,000 b/d Carmon Creek oil sands project, near Peace River in northwest Alberta. Petro-Canada also warned last month that it could cancel its proposed upgrader following a 50% leap in costs for its massive Fort Hills project which could exceed $28 billion (Can.).

In May, StatoilHydro's project was initially delayed for 2 years to 2016 and the upgrader was going to process bitumen into synthetic crude from its 257,000 acres of oil sands leases that were bought last year for $2.2 billion (Can.) to diversify from mature North Sea assets. During the first phase the capacity would be 80,000 b/d and this was expected to cost $4 billion (Can.). Later expansion would boost capacity to to 243,000 b/d.

However, StatoilHydro said it would continue to monitor the cost and price environment and reassess downstream options. "This decision does not impact the upstream part of the company's oil sands venture. The production from the project will be marketed as unprocessed bitumen," the company added.

It will continue with its 10,000 b/d Leismer steam-assisted gravity drainage project that is slated to start up in late 2010. Flint Energy Services Ltd. has been contracted to construct the facility 160 km south of Fort McMurray, Alta., under a $41 million contract (OGJ Online, Nov. 19, 2008).

Contact Uchenna Izundu at uchennai@pennwell.com.

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