CNR Achieves 90% Completion of Horizon Project in Canada

Horizon oil sands ore preparation plant
(Click to Enlarge)

Canadian Natural Resources Limited reported on Feb. 12 its regular quarterly update on the Horizon Oil Sands Project.

Commenting on fourth quarter progress on the Horizon Oil Sands Project, Real Doucet, Sr. Vice President, Oil Sands stated, "We achieved 90% completion of the Horizon Project by year-end 2007, a major accomplishment, which remains on track for first oil in the third quarter of 2008. The remaining 10%, however, is in many ways the toughest as it is the most labour intensive portion of the Horizon Project. Unfortunately, mid to late January and early February saw a significant deterioration in labour productivity on the construction site as much colder than normal weather seriously curtailed activity. The weather also affected the commissioning schedule of certain plants; however, at present this is not expected to have any impact on our targeted completion of Phase 1."

"As of December 31, 2007 our forecasted total costs of the Horizon Project were at 13.4% over our $6.8 billion Board of Directors authorization. We just completed a thorough review of the productivity that we have recently experienced at the Horizon Project construction site and have determined that should no improvements in productivity be achieved through the remainder of construction, then the cost estimate for Phase 1 of the Horizon Project would need to be increased to 28% above the original $6.8 billion Board authorization. If we can regain targeted labour efficiencies and productivity, this overage could be reduced to approximately 25% above the original $6.8 billion Board authorization. This range of outcomes will result in an on-stream cost of less than $80,000 bbl/d of capacity, including the benefits of the significant pre-build capital invested for Phase 2/3.

In the fourth quarter of 2007, we reached many significant milestones including completion of the tailings pond, filling of the raw water pond and preparing two tanks to receive start-up diluent in January. We have experienced minor slippage in certain non-critical path plants where mechanical completion has moved from the end of the second quarter to early in the third quarter - having no expected impact however on targeted Project completion. Our critical path plants, Delayed Coker / Diluent Recovery Unit and Hydrotreater remain on track for first oil in the third quarter of this year. In parallel with completing major systems, we are getting ready for operations. Our rate of operations hiring and training has gained significant momentum with 100% of Mining, 89% of Bitumen Extraction, 80% of Upgrading and 76% of Utilities and Offsites staffing requirements hired to date. We have also now awarded all of the maintenance contracts, with these contractors immediately mobilizing to site in the last part of the fourth quarter of 2007.

We remain focused on timely completion of Phase 1, while getting ready to operate the new facilities. Meanwhile, following Board authorization to proceed with Tranche 2 of our next expansion, we were immediately able to award a contract for an additional Ore Prep Plant to an existing contractor that is performing well. In addition, other long lead equipment (Coke Drums and Reactors) for Phase 2/3 will be delivered to site during the first quarter of 2008, as we look forward to successful construction and completion of future phases."


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