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Mix-Ansicht- Ã-lsand/Syncrude Canada ltd: wird etwas teurer - zani, 05.03.2004, 10:15
Ã-lsand/Syncrude Canada ltd: wird etwas teurer
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Record cost overrun hits Syncrude
By PATRICK BRETHOURAND BRENT JANG
From Friday's Globe and Mail
POSTED AT 9:13 PM EST Thursday, Mar. 4, 2004
Syncrude Canada Ltd. has unveiled the biggest cost overrun in the history of the oil sands, with its owners saying Thursday that its latest expansion will cost $7.8-billion — nearly double the original estimate.
The latest in a string of cost overruns at Syncrude will swell spending on the Stage 3 expansion by $2.1-billion and hold up the completion of the project until early 2006, more than a year's delay from the original deadline. The expansion will boost its upgrader capacity and add 100,000 barrels a day of output.
The head of Canadian Oil Sands Trust, the largest Syncrude shareholder, warned that even more overruns may be on the way, since there is an equal likelihood of the final cost rising or falling up to $300-million.
And costs would have soared even higher, if not for the eight-month delay.
While analysts were expecting some increase in cost estimates, none foresaw billions more in overruns.
“This is rather stunning news,” said Wilf Gobert, vice-chairman of Peters & Co. Ltd. in Calgary.
Syncrude's senior management will not be turned out, although some mid-level workers will lose their jobs, said Marcel Coutu, president and chief executive officer of Canadian Oil Sands.
“There is not a house cleaning. We might be cleaning out a few offices.”
There's already been a changeover of CEOs, with Charles Ruigrok replacing Eric Newell in December, after the long-time Syncrude head retired.
Besides spending additional billions, Canadian Oil Sands and the other Syncrude partners — including Imperial Oil Ltd. and Nexen Inc. will dispatch members of their own staff to help the oil sands producer wrestle costs under control.
Syncrude has been plagued with cost overruns for the past two years, with cost estimates jumping to $4.7-billion in April, 2002, and then to $5.7-billion in the fall of that year. Other oil sands operators, including Suncor Energy Inc. and Shell Canada Ltd., have been hit with rising capital costs, but even those expensive revisions do not compare to that of Syncrude, which is now $3.7-billion above its original budget.
Mr. Coutu pointed to two culprits for the latest overrun. First, delays in engineering work held up construction schedules to an unforeseen extent. Second, the partners did not realize the degree to which limited working space in Syncrude's existing facilities would slow down the expansion work.
Mr. Coutu hinted that Syncrude's Stage 3 expansion could very well be the last multi-billion-dollar megaproject that the oil sands ever see. “The industry has shown they can pretty handily manage billion-dollar type projects, but multiples of that become a different animal.”
The company's Stage 4 expansion is of much more limited ambition and pending plans from other firms are generally calling for a staged approach with capital budgets hovering between $1-billion and $1.5-billion.
Canadian Oil Sands will pay its share of the overrun, $700-million. The trust will not have to cut its quarterly payout as a result, but it said that it will eventually have to raise more equity, which would dilute future payments.
Mr. Coutu said the unexpectedly high price of oil has cushioned the blow, although his company is not depending on higher commodity prices to deal with its higher costs.
Mr. Coutu said he was both surprised and “disappointed” by the extent of the cost overruns, a sentiment echoed by other partners, including Nexen. “We saw things creeping up a little bit over time, but not to this magnitude,” said Mike Backus, an investor relations official at Nexen.
Canadian Oil Sands Trust has the largest stake in Syncrude at roughly 36 per cent, followed by Imperial Oil Ltd. at 25 per cent. Other partners in the consortium are ConocoPhillips Co., Petro-Canada, Nexen Inc., Mocal Energy Ltd. and Murphy Oil Co. Ltd.
Imperial will be on the hook for $500-million of the projected cost overrun, or equivalent to its one-quarter Syncrude interest, spokesman Pius Rolheiser said.
Given Imperial's large cash reserves, the integrated oil company will have no trouble ponying up for its portion of extra bills, he said.
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© 2004 Bell Globemedia Publishing Inc. All Rights Reserved.
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