Canadian Natural Resources Prepares for Start-Up of Horizon Oil Sands Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Canadian Natural Resources Limited (NYSE:CNQ) (Calgary, Alberta) has announced that the company is still targeting first synthetic crude oil production from its Horizon Oil Sands Project by the end of the year. Most aspects of the project are complete, including the mining operation, which has already delivered 300,000 metric tons of oil sands to the plant for equipment-testing purposes. "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," said Senior Vice President for Oil Sands Real Doucet.

The remaining tasks involve a few of the project's hydrotreaters. The gas oil hydrotreating plant (Plant 43) is complete and is currently completing electrical heat tracing and insulation. The distillate hydrotreater (Plant 42) is mechanically complete, but will not begin operation until early next year. The company intends to deliver light, sweet crude to a third-party pipeline by the end of the year and hopes to see the facility operating at 50%-60% in the first quarter of 2009, ramping up production to full capacity later in the year.

Canadian Natural also recently announced its earnings for the third quarter of 2008, which were quite positive. Net earnings for the quarter were $2.31 billion (U.S.), compared with $569 million for 3Q07, despite a reduction in overall production. The company produced 1.49 million cubic feet per day of natural gas, compared with 1.53 million in 3Q07, a drop of 10%. The company produced 306,970 barrels per day (BBL/d) of crude oil and natural gas liquids, compared with 333,063 in 2007, representing a drop of 8%. The increased profits were primarily from the increased price of crude oil and natural gas.

With the winding down of Phase I of the Horizon project and the recently completed 40,000 BBL/d expansion of the company's Primrose East facility, Canadian Natural has plans to significantly reduce capital expenditure in 2009. While the company is expected to finish 2008 with a capital expenditure figure of $6.18 billion, only $3.25 billion has been allocated for the 2009 budget. Spending on the Horizon project will drop from $3.3 billion in 2008 to $466 million next year.

"At Horizon, our world class oil sands project with 6 to 8 billion barrels recoverable, we are very close to startup in Phase I at 110,000 barrels a day," said Horizon's Chairman and Chief Operating Officer, Steve Laut, in a conference call. "Phases II through V will take us to 500,000 barrels a day with a 40-year reserve life and no decline with virtually no reserve replacement costs, with added potential for technology upside. There's absolutely no question that Horizon is a world-class project."

(All monetary values are in U.S. dollars at the rate of 1 USD=1.232 CAD)

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