February 10, 2009 at 1:47 am #3197
BP, Husky put oil sands plans on hold
Claudia Cattaneo Calgary Bureau Chief, Financial Post Published: Tuesday, February 03, 2009
Toby Melville/Reuters BP PLCE has pushed back a decision on whether to go ahead with the Sunrise oil sands project until 2010.
CALGARY — British oil major BP PLC said it’s slowing down its oil sands plans with partner Husky Energy Inc. because it expects costs to deflate.
Andy Inglis, head of exploration and production at BP, said Tuesday a decision on whether to go ahead with the Sunrise project has been pushed back to 2010. The decision had been expected in late 2008.
“The project is continuing as it was currently envisaged, we just need to ensure that we are getting the right inputs to create the right quality margin for the future,” Mr. Inglis said in a conference call with industry analysts to discuss BP’s fourth quarter results.
Sunrise is currently at the pre-engineering stage to assess its optimal design and contracting strategies, Mr. Inglis said.
The decision mirrors project deferrals and cancellations by scores of other companies, including Royal Dutch Shell PLC, Statoil ASA, ConocoPhillips, Petro-Canada and Suncor Energy Inc.
A combination of weak oil prices and high costs have made the Alberta deposits uneconomic at today’s oil prices. Developers are putting pressure on service providers to cut their bills to reflect the slowing economy.
Husky signalled in December it was slowing down oil sands development when it slashed spending to $65-million in 2009, from $300-million in 2008.
The company said the money would be used to moderately ramp up production at its wholly owned Tucker project and optimize the development planning for the Sunrise project. Husky is reporting its results Wednesday. A spokesperson for the company could not be reached.
BP CEO Tony Hayward said he still expects Sunrise to proceed, once it takes advantage “of what I believe will be very strong deflationary pressures in the market place.”
BP entered the oil sands business in late 2007 with a joint venture with Husky that involves combining its Toledo refinery in Ohio with Husky’s Sunrise project in northern Alberta to create an integrated business.
Last year, Mr. Hayward indicated BP could make a similar move involving its refinery in Whiting, Ind., which is being upgraded to handle Canadian heavy oil.
Mr. Hayward said there is no provision in the joint venture agreement with Husky for not proceeding with Sunrise, but that option remains.
“We will proceed or not proceed depending on its viability on the day,” he said. If Sunrise doesn’t go ahead, BP will continue to buy heavy oil in the market, Mr. Hayward said.
BP, which expects oil demand to continue to weaken in 2009, plans to keep capital spending steady in 2009, or around US$20-billion to US$22-billion. BP posted a loss for the period of US$3.3-billion, compared with a profit of US$4.4-billion in the same period last year, on lower oil prices. The company is moving ahead with projects that are at advanced stages, but will take its time on projects where investment decisions haven’t been made, Mr. Inglis said.
February 10, 2009 at 1:54 am #6266
Here is update on BP Toledo JV with Husky. BP has put its plans on hold following suit with Husky partner after Husky decided to push back the Sunrise OS project decision (currently in pre-engineering phase) to 2010 recently. BP is now following suit with the Toledo Refinery portion but leaves option open to proceed even if Sunrise doesn’t.
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