Fort Hills trio to go with design plan

Vancouver — Partners in the Fort Hills oilsands project, located in northern Alberta’s Athabasca region and about 90 km north of Fort McMurray, are moving forward with initial design plans that will examine bringing the operation to the 140,000-barrel-per-day level of synthetic crude oil (SCO) production by late 2011.

Petro-Canada (PCA-T, PCZ-N), with a 55% interest, Teck Cominco (TCK.B-T, TCK-N), with a 15% working interest, and UTS Energy (UTS-T, UEYCF-O), with 30%, have approved plans to proceed with the front-end engineering and design stage at Fort Hills over the next 12 months.

The process will produce a definitive cost estimate for the project, on which a final go-ahead decision will be based. The preliminary capital cost estimate for the mine and bitumen upgrader in the first phase is about $14.1 billion.

A second phase, doubling SCO production capacity to 280,000 barrels per day by 2014, is expected to cost another $12.1 billion.

Teck Cominco became involved in the Fort Hills Energy Limited Partnership in 2005 through a $475-million subscription commitment. Its subscription price will account for just over half of its required 34% contribution ($850 million) to project spending up to $2.5 billion. Once that threshold is reached, the partners will fund project costs proportional to their respective interest levels.

A late 2006 resource estimate of contingent SCO within the Fort Hills partnership calculated roughly 4.7 billion barrels of contained SCO. Average diluted bitumen grade associated with the ore volumes is estimated to be about 11% by weight.