August 12, 2008

Canadian Natural Resources reports quarterly loss as Horizon construction costs rise

CALGARY

Canadian Natural Resources Ltd., whose Horizon oilsands project has run over budget because of snags in getting processing units up and running, has reported a quarterly loss of $347 million on risk-management activities.

There were more odds and ends than expected to deal with in completing construction on Horizon’s upgrading facility, which will process oilsands bitumen into easier-to-refine synthetic crude oil, chief operating officer Steve Laut said.

“In a way it’s like taking possession of your house and you find out all the things the contractor has to come back and fix,” he said.

“Those lists are much longer and much more extensive than we anticipated.”

Mining and power generation at the site are well underway and first bitumen production is on schedule to begin early next month. However, the production of synthetic crude will be pushed a little beyond the third-quarter target startup date.

The delay means the project will cost $9.27 million, about eight per cent more than the previous estimate of $8.74 billion and 36 per cent higher than the original 2004 estimate, the company said.

Cost overruns and delays have been commonplace in the current oilsands environment, as the price of construction materials and labour has skyrocketed.

“We are now beginning to see the fruition of the largest capital project in Canadian Natural’s history.

“This is a major step in our evolution from our very strong company to an even stronger, more sustainable company.”

The company will take lessons learned from Horizon’s first phase into the next ones, Laut said.

The fly-in fly-out practice, in which employees work on the site for several days on end before being flown back home for a rest, was a “definite win,” he said.

Canadian Press

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