May 16, 2008
Horizon oils sands project nears completion
VANCOUVER
Construction on Canadian Natural Resources Limited’s Horizon oilsands project is nearly complete, as the company moves towards the production of oil in the third quarter of 2008.
The company has almost completed construction on the project, despite cost over-runs and reduced productivity on the construction site due to cold weather.
“At the end of the first quarter, capital spending on Phase 1 of the Horizon project was at 111 per cent of the original budget of $6.8 billion,” said a recent progress report from the company.
CNR reached an overall 94 per cent completion at the end of the first quarter of 2008. The company hired 89 per cent of the required personnel, finalized all their maintenance contracts and mobilized all supervision on site.
The pipeline from the site to Edmonton is on track for completion in the second quarter of 2008.
About 750,000 barrels of synthetic crude oil from initial production volumes will be used to fill the pipeline.
In mid to late January and early February the project experienced a significant deterioration in labour productivity as workers experienced a cold snap that caused temperatures to drop to -40 C.
The financial report said a thorough review of productivity at the Horizon project construction site was undertaken.
The report warned that cold weather could boost the cost of Phase 1 well over original estimates.
The forecasted total cost of the Horizon project was $6.8 billion.
On Dec. 31, 2007, the estimated total cost for the project was 13.4 per cent ($900 million) more than the $6.8 billion the board of directors authorized.
If no improvements in productivity were achieved through the remainder of construction, the report estimated the cost for Phase 1 of the Horizon project would need to be increased to 28 per cent above the original $6.8 billion board authorization.
If productivity is regained, the report estimated that this cost over-run could be reduced to approximately 25 per cent above the original $6.8 billion board authorization.
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