OPTI Canada Inc. (OPTI) announces the following project update on Phase 1 of its Long Lake Project (the Project).
SAGD
Commissioning and starting up of the SAGD plant and wells continues. Steaming has commenced on 4 of 10 well pads with all of the well pads expected to be steaming by the end of September, a month later than previously forecast due to the time required to complete all commissioning and start-up activities. It is anticipated that SAGD volumes will ramp-up to full capacity over a 12 to 24 month period.
Upgrader
Progress on portions of Upgrader construction has been slower than previously forecast. Construction is expected to be complete on the hydrocracker, OrCrude(TM) unit and all main plant utilities in the third quarter of 2007, in-line with previous expectations. Completion of the gasifier and air separation units is expected to extend into the fourth quarter due to lower than expected productivity combined with increases in the amount of work required to complete construction. Completion of the sulphur plant has been extended into the first quarter of 2008 due to similar factors as well as difficulties in securing sufficient labour, primarily pipefitters, to advance this unit. Piping is now substantially complete and labour for the remaining work is expected to be in sufficient supply.
Commissioning activities are underway in the completed areas of the plant, and these activities will continue to expand as units reach construction completion. Utility steam boilers are currently being commissioned and are expected to start-up during the third quarter of 2007. Full start-up of the Upgrader will follow commissioning but cannot occur until the sulphur plant is complete and ready for operation. OPTI is committed to following a rigorous and orderly start-up process intended to maximize safe and reliable operations. As a result, start-up activities for the Upgrader are now forecast to occur in the first and second quarter of 2008, with first production of synthetic oil anticipated late in the second quarter. The Upgrader is expected to reach full production capability about 12 to 18 months after start-up.
Capital Costs and Funding
As a result of these challenges, the capital cost for the Project is expected to increase by 10 to 15 percent over the previous forecast of $5.3 billion. To the end of July 2007, $4.86 billion had been incurred on the Project. The key risks in the estimate continue to be the pace of completion of the sulphur plant, access to labour, productivity and the pace of commissioning activities for the various units.
OPTI's 50 percent share of Phase 1 remains funded based on OPTI's working capital and an undrawn $500 million revolving credit facility. Core hole drilling, engineering and planning for Phase 2 and future phases will continue and is expected to be funded with an appropriate balance of equity and debt. OPTI is currently preparing its 2008 capital and operating budget and expects to provide guidance on 2008 production volumes later this year.
"Both the delay in start-up and the capital cost increase are disappointing," said Sid Dykstra, President and Chief Executive Officer of OPTI. "However, the Long Lake Project continues to have attractive economics. Using our proprietary process, we expect to benefit from a significant operating cost advantage on a project that is designed to produce approximately 60,000 bbl/d of synthetic oil for over 40 years."