Fort Hills Oil Sands Project Moves Forward with Design Decision

Overburden haulage is part of pre-stripping operations on this tract of the Fort Hills
oil sands project’s test ground.
Teck Cominco announced in late June that Fort Hills Energy L.P. has adopted the formal design basis for its Fort Hills project, an integrated oil sands mining project that includes a mine and bitumen extraction plant 90 km north of Fort McMurray, Alberta, and an upgrader in Sturgeon County northeast of Edmonton, Alberta. According to the company, this milestone marks the partnership’s commitment to proceed with the front-end engineering and design (FEED) stage. The FEED process will take about 12 months to complete, producing a definitive cost estimate and the basis upon which the final go-ahead decision on the project will be made.

The first phase of the project 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 preliminary capital cost estimate for the mine and upgrading components of the first phase of Fort Hills is $14.1 billion (as spent dollars including escalation). This cost does not include FEED engineering and third-party capital.

The Fort Hills project is expected to be developed in two phases, with the second phase doubling the phase 1 capacity to produce up to a total of 280,000 b/d of synthetic crude oil by 2014. The preliminary capital cost for the mine and upgrading components of the second phase of the project is estimated at $12.1 billion. This cost does not include FEED engineering and third party capital.

Fort Hills Energy consists of Petro- Canada with a 55% working interest, UTS Energy Corp. with a 30% working interest and Teck Cominco with a 15% working interest, with Petro-Canada Oil Sands Inc., a wholly-owned subsidiary of Petro-Canada, as the contract operator for the project.