Teck updates Fort Hills Capital costs projection—pegged at $805 million, up 10%

An aerial view of the Fort Hills project. — Photo: Suncor/Teck

Teck Resources Limited provided an update to its guidance in connection with the status of the Fort Hills project. Suncor, as operator of the Fort Hills Energy Limited Partnership, has provided an update regarding its recently completed review of schedule, project costs and throughput. Suncor advises that the review, at this stage of project development, provides a high degree of confidence on schedule and project costs to completion. In parallel, a review of the plant throughput has revised the steady state production target and expected ramp up.  

Construction as of year-end has surpassed 76% complete, with two of the six major project areas (mining and infrastructure) turned over to operations. All major plant equipment and materials are on site, and all major vessels and process modules have been installed. Shovels, trucks and equipment are mobilizing for operations. As of year-end, 58% of operations personnel have been hired.

The project remains on track to produce first oil in late 2017. The majority of project scope areas are progressing in line with the original plan and budget, but impacts of the 2016 Fort McMurray wildfire as well as productivity challenges have caused an increase in the capital cost estimate for the secondary extraction facility. The revised total project capital forecast is approximately 10% above the project sanction estimate, excluding foreign exchange impacts. Teck’s share of project capital costs through to completion (including foreign exchange), as of December 31, 2016, is now expected to be $805 million, of which approximately $640 million will be spent in 2017. Due to the increase in capital cost, Teck will record an after-tax impairment charge of $164 million in its fourth quarter results.

Oil production from the first of three secondary extraction units is still expected by the end of 2017. The other two secondary extraction units are scheduled to be completed and commissioned in the first half of 2018, and 90% of the expected production rate achieved by the end of 2018. Suncor is also exploring the opportunity to reduce the ramp-up period. 

Suncor has announced an 8% increase in the nameplate capacity to 194,000 barrels per day (100% basis). Teck anticipates an average production rate of 186,000 barrels per day over the life of the project.