CNR: Horizon Oil Sands Project Offers 'Tremendous Training Benefits'

Canadian Natural Resources Limited provided its regular quarterly update on the Horizon Oil Sands Project.

"It is an exciting time for the Horizon Project as we methodically progress towards first oil targeted for the third quarter of 2008." commented Real Doucet, Senior Vice President, Oil Sands. "In the first quarter, Mine Production commenced operations, using our mine operators and equipment to work on the overburden removal. This is the second area of the Horizon Project where we have begun operations, with water systems being the first, and represents a significant milestone for Canadian Natural. This early operation provides tremendous training benefits for our operators prior to full start up.

We reached an overall 94% completion at the end of the first quarter of 2008, with craftspeople actively performing hydrotests, airblows, rotation checks and various pre-commissioning activities. Our operations teams are walking down the systems in each plant ensuring they are complete prior to commissioning. We have energized the last substation on site and the Extraction Plant started operating on water in late April to ensure there are no surprises when we begin processing oil sands and extract the bitumen through these plants.

Commissioning is progressing very well as we have already turned over and commissioned 96 plant systems (out of an estimated 820), 10 mine haul trucks (out of 23), 2 hydraulic shovels and are preparing to commission the first electric shovel, all according to schedule. The balance of the mine equipment will be turned over and commissioned to support the ramp up of oil sands mining and bitumen production.

As we move to construction completion, challenges arise on a regular basis; however due to the strength, experience and depth of our team we continue to meet and find solutions as we target start up and synthetic crude oil production in the third quarter of this year.

At the end of the first quarter, capital spending on Phase 1 of the Horizon Project was at 111% of the original budget of $6.8 billion. Looking forward to completion, targeted for the third quarter of 2008, we currently anticipate capital spending on Phase 1 construction to be within the previously announced range of 25%-28% above the original budget.

We have maintained solid progress in our hiring of operators with 89% of required personnel in place and have finalized all of our maintenance contracts and mobilized all supervision on site. We are prepared to start up the plants and have received on site the 190,000 barrels of diluent for start up.

Once we have completed commissioning and begun operations, it is anticipated that ramp up to full production will occur over a 3 to 4 month period. We are targeting to be at 85% design capacity by year end 2008. Full capacity is anticipated to be achieved during Q1/09 as planned.

The sales pipeline which will transport production from the site to Edmonton is on track for completion in the second quarter of 2008. Approximately 750,000 barrels of synthetic crude oil from initial production volumes will be used to fill the pipeline.

While our focus remains on completion and startup of Phase 1, we continue to plan for future expansions. We have received the 2 coke drums and all components for the 2 hydrotreating reactors that will be installed as part of the Phase 2/3 expansion."


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