Canadian oilsands in trouble.

[tex]

As so many other companies operating in northern Alberta have discovered, there’s a huge difference between a pretty presentation in a conference hall and bulldozers churning in the mud. It smacked Petro-Canada harder than a stadium-clearing homer swatted by Barry Bonds.

Suncor endured the costs of its Millennium project, soaring 70 percent to C$3.4 billion from its original estimate of C$2 billion. The price elevator for Shell didn’t stop rising until the bills hit C$5.7 billion, up 50 percent from the initial target of C$3.8 billion. Syncrude is trying to pare the costs of its latest expansion, called Phase 3, from C$5.6 billion to something closer to the original target of C$4.1 billion.

Brenneman said his firm’s increases were greater than 50 percent, although he did not provide a specific figure. This means the combined price for refinery revamp and Meadow Creek is near C$8.4 billion, dramatically changing the economics.

"It was only in the last month or so ... that the numbers started to pop up and that's when the alarm bells went off," he told analysts during a conference call.

Higher costs for labor and material plus reduced productivity from skilled staff spread thin by the boom were prime reasons for the headache-inducing budget changes, the executive said.

The announcement by Petro-Canada landed like the initial wave of cruise missiles on Baghdad at the start of the war--it was completely unexpected. However, the decision was consistent with the past behavior of Brenneman, a former ExxonMobil executive who has installed a rigorous focus on capital discipline since taking over in January 2000.

Besides pausing on the oilsands, Petro-Canada is also looking at international investment opportunities, including Iraq. The review is scheduled to be finished by the end of the year.

Brenneman said the two initiatives were separate, but it makes sense for more lucrative international projects to move up the company’s agenda at the expense of capital-intensive oilsands projects with low returns. It’s a logical move that would be supported by analysts and investors.

Petro-Canada’s decision, while not final, marks the latest in a series of setbacks for Alberta’s oilsands, a trend which should concern U.S. policy-makers and residents.

http://www.rigzone.com/news/article.asp?a_id=6493

[G-Town]

This sucks the company I work for does business for Suncor and Syncrude, in the Tarsands. I hope they dont go under.

[skinsanity56]

don't worry the oilsands are 1 of the largest oil reserves in the world.these soaring costs are from the expansion of these operations.every year they figure out a cheaper/more profitable way of extracting the oil from the sand.& if your worried about suncor or syncrude going under DON'T,there very stable companies.they don't have all there eggs in 1 basket so to speak.

tex & i had this discussion awhile ago..

[tex]

Originally posted by skinsanity56

don't worry the oilsands are 1 of the largest oil reserves in the world.these soaring costs are from the expansion of these operations.every year they figure out a cheaper/more profitable way of extracting the oil from the sand.& if your worried about suncor or syncrude going under DON'T,there very stable companies.they don't have all there eggs in 1 basket so to speak.

tex & i had this discussion awhile ago..

Quite right skinsanity56. These are big boys with very deep pockets. No way they simply shutdown and walk away, they're just going to slow the rate of growth a little.

They will shift just long enough to pluck the low hanging fruit in Iraq. Once that's gone the oilsands will be there waiting for them. By that time the price of oil may be a little higher making the extraction process even more cost effective.