Oil Sands Truth: Shut Down the Tar Sands

Opti-Nexen Rethinking Long Lake Expansion

Nexen, Opti delay decision on next oil sands phase
Mon Oct 20, 2008 1:22pm EDT

CALGARY, Alberta, Oct 20 (Reuters) - Nexen Inc and Opti Canada Inc have postponed a decision to expand their new Long Lake, Alberta, oil sands project, citing the financial market crisis and uncertainty over costs to curb carbon emissions, a Nexen official said on Monday.

The partners in the C$6.1 billion ($5.1 billion) development, which is now in start-up mode, had expected to decide by the end of this year whether to begin work on twinning the project.

"There's no new clarity on climate change at all and we also had the meltdown in the market," Nexen spokesman Michael Harris said. "Now we're thinking maybe we should take a long hard look at something like this before we put it in front of the board."

Skidding oil prices and the credit crisis have sent share prices of oil sands developers like Nexen and Opti tumbling and raised questions over the viability of major projects across the industry.

Meanwhile, Canadian energy companies have signaled that they expect to rein in spending as they set budgets for 2009, with the emphasis on operating within their cash flow.

Harris said the Long Lake expansion may now face a go-ahead decision next year.

The first phase of the project, which uses a proprietary technology for upgrading the tar-like crude into light synthetic oil with minimal amounts of natural gas, is designed to produce 60,000 barrels a day of the product.

Nexen said at the start of this month that the 50-50 partners were beginning operations at up to 25,000 barrels a day. Ramp-up could take 12 to 18 months.

The companies had hoped that more would be known about the future costs of reducing greenhouse gas emissions by the time the Canadian general election was held last week, but that has not happened, Harris said.

The oil industry has been critical of a lack of co-ordination on carbon policy between the federal and Alberta governments. Calls for a national carbon tax were among the main issues in the campaign ahead of the Oct. 14 vote.

Shares in Nexen, Canada's No. 4 independent oil explorer, were up C$1.11, or 7 percent, at C$17.31 on the Toronto Stock Exchange. However, they are down by more than half since the end of June.

Opti was up 50 Canadian cents, or 9 percent at C$6.08. It is down 74 percent over the same period.


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