Husky Energy Inc ( HSE-T 28.00 0.12 0.43%), Canada's No.3 integrated oil company, said on Monday its 60,000 barrel per day Sunrise oil sands project will cost $2.7 billion, 8 percent above previous estimates, as it forecast rising oil production for 2013.
Husky, controlled by Hong Kong billionaire Li Ka-shing, did not say the why the price tag for the Sunrise project, a joint venture with BP Plc, was on the rise but said 85 percent of the costs of the project slated to open in 2014 are now fixed.
The increase is modest by the standards of the oil sands, the world's third-largest crude oil reserve. Rising material costs, weak planning and a tight supply of skilled labour have added billions of dollars to the costs of some large-scale projects.
Analysts said the cost increase was minor and less than some had expected.
"This is the first overrun announced to-date and a fairly small one relative to what we have seen out of other projects," Menno Hulshof, an analyst with TD Securities, said in a research note.
RISING OIL PRODUCTION
Husky said it expects to produce 310,000 to 330,000 barrels of oil equivalent per day (boepd) in 2013, up from an expected average for this year of 301,000 boepd.
The 2013 forecast includes a planned decrease in natural gas production and an increase in more profitable light, medium and heavy oil output.
"For 2013, I would fully expect Husky to maintain its ongoing focus on conventional heavy oil development, which includes the typical cold heavy oil production from western Saskatchewan and eastern Alberta," Macquarie analyst Chris Feltin said.
The company, known for its Husky and Mohawk-branded gas stations, said its Pikes Peak South and Paradise Hill heavy oil projects in Saskatchewan were producing above their designed capacity.
Husky has chopped dry gas development spending and, like numerous other producers, is concentrating on gas prospects that offer higher-value liquids opportunities, Husky CEO Asim Ghosh said earlier this year.
[Johnny: This might be the trend for all oil sands stocks for a while, higher production cost and weaker oil prices. I was listing to one call on the weekend that suggested they were only getting a price in the high $70 for their oil in Calgary. This below WTI and world prices.
The OPEC countries use to able to control prices quite aggressively. It looks like that grip may be slipping as local supply demand issues take control.]] |
