Fort Hills Energy Hires Team of E&C Firms for $14 Billion Oil Sands Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Fort Hills Energy LP (Calgary, Alberta), a joint venture between Petro-Canada Incorporated (TSX:PCA) (Calgary, Alberta), UTS Energy Incorporated (OTC:UEYCF) (Calgary, Alberta), and Teck Cominco Limited (NYSE:TCK) (Vancouver, British Columbia), has hired an army of the world’s leading engineering and construction (E&C) firms and is moving forward with front-end engineering and design (FEED). The FEED process will take about 12 months to complete, producing a definitive cost estimate, which will be used to determine the viability of the project. As the managing partner in the oil sands project, Petro-Canada has broken the project sites into 13 sections called silos: six located at the bitumen production site and seven at the bitumen upgrader site. Each silo has been assigned an E&C firm to provide support services in the areas of scheduling, estimating, procurement and construction management.

Industrial Info has been tracking the progression of the Fort Hills Oil Sands Project since July 2000, when the project was under the development of TrueNorth Energy LP. In early 2003, TrueNorth Energy deferred the project because of market conditions and the inability to attract a partner for the project. In July of 2004, UTS Energy Corporation resurrected the Fort Hills Oil Sands Project with the purchase of TrueNorth Energy LP (IndustrialInfo.com May 17, 2005 - UTS Energy Resurrects $3 Billion Canadian Oil Sands Mine and Upgrader). In that time the Fort Hills Project has grown from an estimated $675 million for a 90,000 barrel per day mine to a 280,000 barrel per day (after two phases) integrated oil sands mine, processing and synthetic crude upgrader with an estimated build cost of $14 billion. Increase in costs for equipment, engineering related services, and labor are some of the driving factors of the dramatic jump in capital projections for oil-sands-related projects in Alberta. Construction activity in the Athabasca/Alberta region is increasing exponentially, and resources have to be brought in from long distances.

Petro-Canada awarded Hatch Energy Limited (Calgary, Alberta) a contract to provide engineering services for the mine and ore preparation plant. Jacobs Canada Incorporated (Calgary, Alberta) and Jacobs Engineering Group (Cary, North Carolina) were awarded the utilities and off-sites contract, which includes a 100-megawatt combined-cycle power-cogeneration plant, utility corridor and tank farm. Fluor Canada Limited (Vancouver, British Columbia) will oversee construction of the extraction plant. SNC-Lavalin Incorporated (Calgary, Alberta) has been awarded the froth-treatment plant. CH2M Hill Incorporated (Calgary, Alberta) will provide engineering services for both the mine and upgrading sites regarding project infrastructure including roads, non-process buildings and plant-site development.

The Fort Hills Project is an integrated oil sands mining, processing and synthetic crude production project that is projected to produce 280,000 barrels per day of synthetic crude oil by 2015. The project will be constructed in two phases with a $14 billion Phase I producing 160,000 barrels per day of bitumen by late 2011 with 140,000 barrels per day of synthetic crude oil by the middle of 2012. The facilities for the $6 billion mining and bitumen production portion of Phase I will be located about 90 kilometers north of Fort McMurray, Alberta, and will be connected to the $5 billion bitumen upgrading site in Sturgeon County about 40 kilometers northeast of Edmonton, Alberta, by a diluted bitumen pipeline measuring 700 kilometers in length. The remaining $3 billion segment of phase I will be used for site development and infrastructure work. A proposed $12 billion second phase, which would double the bitumen production and synthetic crude oil capacity will follow.

Fort Hills Energy LP consists of Petro-Canada Incorporated with a controlling 55% interest, UTS Energy Incorporated with a 30% share and Teck Cominco Limited with the remaining 15%; with Petro-Canada Oil Sands Incorporated, a wholly owned subsidiary of Petro-Canada, as the contract operator for the project.

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