Canadian Natural Resources Limited (TSX: CNQ) (NYSE: CNQ)
("Canadian Natural") is pleased to provide its regular quarterly
update on the Horizon Oil Sands Project ("Horizon Project").
Steve Laut, President and Chief Operating Officer, commented,
"Canadian Natural has achieved a significant milestone as we
proceed with the final construction, commissioning and staged
start-up of the Horizon Project and begin to realize the benefits
of the largest single capital project in Canadian Natural's
history. The start-up of the Horizon Project is a major step for
Canadian Natural. We continue to evolve and diversify our asset
base and look forward to the continuous stream of cash flow for
years to come. The result is a stronger and more sustainable
company."
In Q2 and Q3 to date, Canadian Natural has begun the staged
start-up of the Horizon Project. There are seven stages to the
start-up of the Horizon Project and the associated targeted
start-up dates are as follows:
Stage 1 - Mining
- The mining operation has been ready for operation since May,
and continues to move overburden. The mining team awaits the call
for first oil sands delivery.
Stage 2 - Steam Supply
- The utility plants have been supplying low, medium and high
pressure steam in stages, with the last steam (high pressure)
delivered in the third week of July for testing and commissioning
purposes.
Stage 3 - Bitumen Crude Oil Production
- The Bitumen Crude Oil Production operations are in the final
stages of commissioning with first bitumen crude oil production
targeted for early September.
Stage 4 - Electricity Generation
- The Co-generation Plant is targeted to deliver full load
electricity in the second half of September.
Stage 5 - Sulphur Plant/Sour Gas Treating
- The Sulphur Plant is targeted to be ready to receive sour gas
feed mid-August and circulate amine, awaiting the first delivery of
sour gas.
Stage 6 - Partially Upgraded Crude Oil Production
- The Delayed Coker/Diluent Recovery Unit Plants are in the
commissioning stage concurrent with the completion of final task
lists (i.e. punch-lists) and are targeted to deliver partially
upgraded crude oil to intermediate tanks by the end of
September.
Stage 7 - 34 degrees API, Light Sweet Synthetic Crude Oil
Production
- The Naphtha Hydrotreating Plant (Unit 41) is completing loop
checks and insulation concurrent with commissioning. First product
output is currently targeted for October.
- The Gas Oil Hydrotreating Plant (Unit 43) is completing
punch-lists, loop checks, electrical heat tracing and insulation
concurrent with commissioning. First product output is currently
targeted for the fourth quarter of 2008.
- First, 34 degrees API, light sweet synthetic crude oil ("SCO")
in the sales pipeline is currently targeted for the fourth quarter
of 2008, with estimated capacity of 70,000 bbl/d, meeting our
scheduled product ramp-up.
- The Distillate Hydrotreating Plant (Unit 42) is finishing
mechanical completion and completing electrical heat tracing,
insulation and loop checks. First product output is currently
targeted for the latter part of the fourth quarter of 2008.
Estimated capacity will be at 110,000 bbl/d of 34 degrees API,
light sweet SCO upon plant completion of Unit 42, ramping up
production to facility capacity and maintaining our previous
production ramp-up schedule.
Real Doucet, Senior Vice-President, Oil Sands, further
commented, "During the second quarter of 2008 we completed a
majority of the pre-commissioning activity, commissioned another
shovel and 12 more trucks in the mine, brought on the Utilities
(air, water, steam, power and natural gas), and commenced operating
several of the Bitumen Production plants on water as a "wet run"
before we introduce oil sands. As planned, we are staging our
start-up of the Horizon Project by getting the mine and front end
plants commissioned, operational, and methodically moving through
each step to produce SCO. We are finding the Pre Start-Up Safety
Reviews are taking longer to complete than originally anticipated,
however, we are remaining disciplined and will not put our
employees, contractors or facilities at risk.
We made significant progress but we have found that testing and
closing all safety and operations punch-lists are taking us a
little longer than expected. We turned over 42% of the over 800
plant systems to operations at the end of the second quarter of
2008. A high level overview of progress by major plant facility at
the Horizon Project is as follows:
- Mining - Completed, ready to mine oil sands and continues to
move overburden
- Ore Preparation Plant - Completed, targeted to receive first
oil sands in August
- Hydrotransport - Completed, ready to accept slurry
- Piperack - Completed, live and operational
- Extraction - Completed, ready for operation
- Froth Treatment - Targeted to be complete by August
- Delayed Coker/Diluent Recovery Unit - Commissioning well
underway
- Hydrogen Plant - Completed, turned over to operations
- Hydrotreaters - Units 41 and 43 completing loop checks, Unit
42 encountering some scheduling issues.
- Co-generation - Completed, producing steam
- Sulphur Plant - Completed, turned over to operations
- Tankage - Completed, ready for first oil
- Main Control Room - Completed, live and operational
- Utilities & Services - Completed, live and operational
- SCO Pipeline (third party owned and operated) - Completed,
ready to accept product with terminaling facilities in Edmonton
arranged.
We continue to face many challenges, the critical path item
being the completion and turnover of all three Hydrotreating Plants
(Units 41, 42 and 43) in a small window. Our Distillate Plant (Unit
41) and Gas Oil Hydrotreater Plant (Unit 43) have encountered
delays and schedule slippage resulting in commissioning beyond the
third quarter. Our operations team has developed an overall
start-up scenario for initial operation at approximately 60% of
design rate until the Distillate Hydrotreating Plant is
commissioned to mitigate any impact to our overall production
ramp-up.
After our thorough monthly review in the second half of July
2008, it was determined that we are experiencing schedule slippage
with the Upgrading/Hydrotreating Plants and it is taking longer
than planned to complete testing, reinstatement and
pre-commissioning activities of these plants. A detailed review of
our current cost estimate indicates that the Horizon Project
targeted final cost will increase by approximately 8% or
approximately $525 million above our previous construction cost
estimates bringing the total cost estimate of the Horizon Project
to approximately 36% above our original 2004 $6.8 billion estimate,
or approximately $9.27 billion (up from the previous total cost
estimate of $8.74 billion). This increase will result in a targeted
on-stream cost of $84,000 bbl/d of capacity, including the benefits
of the significant pre-build capital invested for Phase 2/3.
While our primary focus is completing Phase 1 and producing SCO,
we have a team working on future expansions of the Horizon Project.
We have several major long lead items for Phase 2/3 expansions on
site, including the coke drums and hydrotreating reactors. The
reactors have been assembled on site and hydrotested. We have
awarded nearly all the Engineering (detailed design) and
Procurement contracts for the Tranche 2 scope of the Phase 2/3
expansion and have held kick-off meetings with the majority of the
contractors."
Real Doucet added, "As a final note, we are managing to meet our
commitment to safety and celebrated over 20 million manhours
without a lost time incident - more than one year - during the
second quarter of 2008. Along with systems and start-up training
for a significant number of staff, we have completed our 'Going
Live' safety orientation for all Horizon Project employees and
contractors. The Pre Start-Up Safety Reviews have been initiated in
all plants and the learnings from earlier system turnovers are
being applied."
Accomplished to the end of the Second Quarter of 2008
- Overall construction progress is 96.5% complete.
- Mine overburden removal has moved 67.6 million bcm (bank cubic
meters), representing approximately 97% of the total required to be
moved prior to start-up. We are using our own forces for overburden
removal along with contractor fleet.
- In Mining, 4 of our 5 large excavators, 16 of 23 heavy haul
trucks and all of our support equipment are operational.
- Completed flow through Dyke Construction in Mining.
- Main Control Room turned over to Operations.
- Completed all hydrotests, blows and flushes in Gas Treating
and Sulphur Recovery.
- Introduced water to the Extraction plant in April.
- Completed piping in Delayed Coker/Diluent Recovery Unit
area.
- Completed Piping, Electrical and Insulation in Piperacks.
- Produced first steam in Co-generation Plant.
- Completed construction of Tank 2 and began filling with
distillate for start-up.
Milestones targeted for the Third Quarter of 2008
- Mining of first oil sands.
- Complete remainder of Ore Preparation Plant and start-up.
- Complete commissioning of Extraction and Froth Treatment and
produce first bitumen crude oil.
- Complete and commission Flares and Hydrogen Plant.
- Complete construction and start commissioning Delayed
Coker/Diluent Recovery Unit and Sulphur Plant.
A picture gallery providing visual updates on construction
progress is available on the Company's website
(http://www.cnrl.com/horizon/about_horizon/photo_gallery.html).
The Company's results for the second quarter of 2008 will be
released on August 7th, 2008. A conference call will be held on
that day at 7:00 a.m. Mountain Daylight Time, 9:00 a.m. Eastern
Daylight Time.
Canadian Natural is a senior oil and natural gas production
company, with continuing operations in its core areas located in
Western Canada, the U.K. portion of the North Sea and Offshore West
Africa.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document or documents incorporated
herein by reference constitute forward-looking statements or
information (collectively referred to herein as "forward-looking
statements") within the meaning of applicable securities
legislation. Forward-looking statements can be identified by the
words "believe", "anticipate", "expect", "plan", "estimate",
"target", "continue", "could" "intend", "may", "potential",
"predict", "should", "will", "objective", "project", "forecast",
"goal", "guidance", "outlook", "effort" "seeks", "schedule" or
expressions of a similar nature suggesting future outcome or
statements regarding an outlook. Statements relating to "reserves"
are deemed to be forward-looking statements as they involve the
implied assessment based on certain estimates and assumptions that
the reserves described can be profitably produced in the future.
There are numerous uncertainties inherent in estimating quantities
of proved crude oil and natural gas reserves and in projecting
future rates of production and the timing of development
expenditures. The total amount or timing of actual future
production may vary significantly from reserve and production
estimates. In addition, these statements are not guarantees of
future performance and are subject to certain risks and the reader
should not place undue reliance on these forward-looking statements
as there can be no assurance that the plans, initiatives or
expectations upon which they are based will occur.
The forward-looking statements are based on current
expectations, estimates and projections about Canadian Natural
Resources Limited (the "Company") and the industry in which the
Company operates, which speak only as of the date such statements
were made or as of the date of the report or document in which they
are contained and are subject to known and unknown risks,
uncertainties and other factors that could cause the actual
results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.
Such factors include, among others: general economic and
business conditions which will, among other things, impact demand
for and market prices of the Company's products; volatility of and
assumptions regarding crude oil and natural gas prices;
fluctuations in currency and interest rates; assumptions on which
the Company's current guidance is based; economic conditions in the
countries and regions in which the Company conducts business;
political uncertainty, including actions of or against terrorists,
insurgent groups or other conflict including conflict between
states; industry capacity; ability of the Company to implement its
business strategy, including exploration and development
activities; impact of competition; the Company's defense of
lawsuits; availability and cost of seismic, drilling and other
equipment; ability of the Company and its subsidiaries to complete
its capital programs; the Company's and its subsidiaries' ability
to secure adequate transportation for its products; unexpected
difficulties in mining, extracting or upgrading the Company's
bitumen products; potential delays or changes in plans with respect
to exploration or development projects or capital expenditures;
ability of the Company to attract the necessary labour required to
build its thermal and oil sands mining projects; operating hazards
and other difficulties inherent in the exploration for and
production and sale of crude oil and natural gas; availability and
cost of financing; the Company's and its subsidiaries' success of
exploration and development activities and their ability to replace
and expand crude oil and natural gas reserves; timing and success
of integrating the business and operations of acquired companies;
production levels; imprecision of reserve estimates and estimates
of recoverable quantities of crude oil, bitumen, natural gas and
liquids not currently classified as proved; actions by governmental
authorities; government regulations and the expenditures required
to comply with them (especially safety and environmental laws and
regulations and the impact of climate change initiatives on capital
and operating costs); asset retirement obligations; the adequacy of
the Company's provision for taxes; and other circumstances
affecting revenues and expenses. Certain of these factors are
discussed in more detail under the heading "Risk Factors".
The Company's operations have been, and at times in the future
may be affected by political developments and by federal,
provincial and local laws and regulations such as restrictions on
production, changes in taxes, royalties and other amounts payable
to governments or governmental agencies, price or gathering rate
controls and environmental protection regulations. Should one or
more of these risks or uncertainties materialize, or should any of
the Company's assumptions prove incorrect, actual results may vary
in material respects from those projected in the forward-looking
statements. The impact of any one factor on a particular
forward-looking statement is not determinable with certainty as
such factors are dependent upon other factors, and the Company's
course of action would depend upon its assessment of the future
considering all information then available.
Readers are cautioned that the foregoing list of important
factors is not exhaustive. Unpredictable or unknown factors not
discussed in this report could also have material adverse effects
on forward-looking statements. Although the Company believes that
the expectations conveyed by the forward-looking statements are
reasonable based on information available to it on the date such
forward-looking statements are made, no assurances can be given as
to future results, levels of activity and achievements. All
subsequent forward-looking statements, whether written or oral,
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by these cautionary
statements. Except as required by law, the Company assumes no
obligation to update forward-looking statements should
circumstances or Management's estimates or opinions change.
Contacts: Canadian Natural Resources Limited Allan P. Markin
Chairman (403) 514-7777 (403) 514-7888 (FAX) Canadian Natural
Resources Limited John G. Langille Vice-Chairman (403) 514-7777
(403) 514-7888 (FAX) Canadian Natural Resources Limited Steve W.
Laut President and Chief Operating Officer (403) 514-7777 (403)
514-7888 (FAX) Canadian Natural Resources Limited Douglas A. Proll
Chief Financial Officer and Senior Vice-President, Finance (403)
514-7777 (403) 514-7888 (FAX) Canadian Natural Resources Limited
Corey B. Bieber Vice-President, Finance & Investor Relations
(403) 514-7777 (403) 514-7888 (FAX) Canadian Natural Resources
Limited 2500, 855 - 2nd Street S.W. Calgary, Alberta T2P 4J8 Email:
ir@cnrl.com Website: www.cnrl.com
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