Canadian Natural Resources Pushes Forward with Horizon Oil Sands Project

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

Steve Laut, President and Chief Operating Officer of Canadian Natural commented, "Canadian Natural continues with the completion of the construction, commissioning and staged start up of the Horizon Project where we have made significant progress. We are encountering and overcoming challenges in our drive to complete the Project and commence production of Synthetic Crude Oil. These challenges are primarily related to commissioning and startup of the more complex components of the Project. We have resolved these challenges in the Delayed Coker, the Co-generation Plant and the Hydrogen Plant. We are currently in the process of resolving outstanding matters in the Naphtha Hydrotreater and Gas Oil Hydrotreater in the Secondary Upgrading process. We continue to target first Synthetic Crude Oil production in 2008, but recognize that there must not be any further delays in the completion or commissioning of these complex components of the Project. The construction and operations teams in all areas continue to work together to resolve issues and continue to test and prepare for operations."

Canadian Natural is continuing with the staged start up of the Horizon Project. The seven stages to the start up of the Horizon Project, as outlined in the second quarter update release, and the associated targeted start up dates are as follows:

Stage 1 - Mining

  • The Mining Operation is ready and continues to move overburden. The mining team has already delivered over 300,000 tonnes of mined oil sands to the Plant for test purposes.

Stage 2 - Steam Supply

  • As previously targeted, the utility plants have been supplying low, medium and high pressure steam for commissioning and start up purposes since July of this year.

Stage 3 - Bitumen Crude Oil Production

  • The Bitumen Crude Oil Production operations are fully commissioned except for Froth Treatment. The delays encountered in Froth Treatment have now been resolved. The necessary re-work has been completed and commissioning is well underway. As previously targeted, first bitumen crude oil production of approximately 160,000 barrels for test purposes was achieved in September.

Stage 4 - Electricity Generation

  • The Co-generation Plant has been producing steam since late July. Electricity generation has been commissioned and is ready for operations.

Stage 5 - Sulphur Plant/Sour Gas Treating

  • The Sulphur Plant is complete and being turned over to operations for commissioning.

Stage 6 - Partially Upgraded Crude Oil Production

  • The Delayed Coker / Diluent Recovery Unit Plants were completed in late October and have been turned over to operations for commissioning and are currently circulating diesel and waiting for Secondary Upgrading (Hydrotreaters) to start up.

Stage 7 - 34 degrees API, Light Sweet Synthetic Crude Oil Production

  • The Naphtha Hydrotreating Plant (Plant 41) is completed and currently being commissioned.
  • The Gas Oil Hydrotreating Plant (Plant 43) is completing electrical heat tracing and insulation concurrent with commissioning.
  • With an estimated start up capacity of 70,000 bbl/d, first delivery of 34 degrees API, light sweet SCO to the sales pipeline is currently targeted for late in the fourth quarter of 2008.
  • The Distillate Hydrotreating Plant (Plant 42) is mechanically complete except for electrical heat tracing and insulation. First product output through Plant 42 is currently targeted for the latter part of Q1/09 enabling production to start ramping up to targeted facility capacity of 110,000 bbl/d.
  • Targeted production ramp up would see 50-60% of facility capacity by the end of Q1/09 and reach full targeted facility capacity later in 2009.

Commenting on third quarter progress, Real Doucet, Senior Vice President, Oil Sands, stated "The majority of the processing plants are either fully commissioned or well into commissioning. The remaining work is being carefully managed, to ensure a successful project by having all the necessary systems operational for cold weather. The safety and well-being of our contractors and operations staff remains a priority. Our on-site manpower is ramping down as we have reduced our construction workforce by over 50% during Q3/08 to approximately 2,500 tradesmen currently on site. The necessary operators required for start up and a strong management team are all in place."

A high level overview of progress by major plant facility at the Horizon Project is as follows:

  • Mining - Completed, ready for oil sands mining operation, continues to move overburden
  • Ore Preparation Plant - Completed, ready for operation
  • Hydrotransport - Completed, ready for operation
  • Piperack - Completed, live and operational
  • Extraction - Completed, ready for operation
  • Froth Treatment - Completed, in commissioning and testing
  • Delayed Coker / Diluent Recovery Unit - Completed, circulating diesel and ready for operation
  • Co-generation - Completed, producing steam and power
  • Sulphur Plant - Completed, turned over to operations for commissioning and testing
  • Tankage - Completed, ready for operation
  • Main Control Room - Completed, live and operational
  • Utilities & Services - Completed, live and operational
  • SCO Pipeline (third party owned and operated) - Completed, ready for operation
  • Hydrogen Plant - Completed, turned over to operations for commissioning and testing
  • Hydrotreaters - Plant 41 has been completed and turned over to operations for commissioning and testing. Plant 43 is completing electrical heat tracing and insulation while starting commissioning. Plant 42 is mechanically complete with electrical heat tracing and insulation to be completed before turning over to operations for commissioning and testing.

The delays experienced and extended commissioning schedule has lead to an increase of $441 million to the Project forecast construction costs. This results in the revised total cost estimate for Phase 1 of the Horizon Project to be approximately $9.7 billion. The targeted on-stream cost estimate is $88,200 bbl/d capacity, including the benefits of the significant pre-build capital invested for future phases. Although Canadian Natural is disappointed with the increase to the overall targeted project cost, the Company wants to ensure that it is done right, with the safety of the staff and contractors, along with the quality of the operation, always in mind.