Buffeted by a frigid winter in northern Alberta and still suffering from transport delays in Montana and Idaho, Imperial Oil of Canada has raised the estimate of initial costs for its Kearl oil sands project by $2 billion.

Canadian media reported last week that Imperial, which is 70 percent owned by Exxon Mobil Corp., now predicts it will begin mining diluted bitumen by the end of March – three months later than its long-expected startup. The first phase will cost $12.9 billion, not the $10.9 billion projected in June 2011.

The transportation setbacks included a successful civil suit by Missoula County and four co-plaintiffs that stopped the Montana Department of Transportation from issuing permits for more than 200 “megaloads” on U.S. Highway 12 over Lolo Pass.

Imperial Oil was forced to break the modules into lower-profile pieces to haul them on interstate routes, then reassemble them near Edmonton.

“This was an enormous work effort … involving hundreds of workers for more than a year,” Imperial spokesman Pius Rolheiser told CBC News last week.

In a fourth-quarter results news release, Bruce March, Imperial’s chairman, said the initial development and expansion projects will develop 3.2 billion barrels at a unit cost of roughly $6.80 per barrel.

“This is up 10 per cent from the prior estimate of $6.20 per barrel, driven by the cost of re-sequence work from the module transportation issues and the early onset of winter and harsh weather during startup of the Kearl initial development,” March’s statement said.

Despite the module delays the past two years, company officials continued to say the Kearl project remained on schedule to fire up by the end of 2012. That changed in December, when it became clear that the weather wouldn’t allow construction to be completed until January.

Temperatures in the Fort McMurray, Alberta, region dipped close to minus 40 Fahrenheit.

Last week’s announcement moved the startup estimate back even further, though Imperial/Exxon expects the Kearl fields to be a 40- to 50-year project. Some say it may be even later in the spring before mining begins.

“We would not be surprised to see production not starting up until May,” Andrew Potter, an analyst at CIBC World Markets, told CNBC.com.

Rolheiser couldn’t be specific about how much money the module transport delays cost the company, but he did tell the Calgary Herald “it would be accurate to say this was the largest factor in the upward cost revision.”

Foreign exchange rates also increased the project’s costs, an Exxon Mobil official said.

Reporter Kim Briggeman can be reached at (406) 523-5266 or by email at kbriggeman@missoulian.com.

More from missoulian.com

(11) comments

GrizRich
GrizRich

First off this a fools errand this business of hauling megaloads on 12. First the State of Idaho manages to somehow put millions of dollars into fixing up highway 12, the highway to no where while roads that people really use fall apart all over the State. Then the idea of hauling megaloads through the treacherous canyon along the Lochsa River is crazy...sooner or later you are going to crash a megaload or have a landslide push it into the river and its going to take months to clear the road and river....The whole thing started because some Governor of idaho made cozy deal with Exxon to use the port of Lewiston, ID (which a real boondoggle in of itselt) and agreed to greatly improve the highway..all in secret of course. Next this is a scenic river corridor and doesn't need to be industrialized like some folks want to do. We the public don't need to be subsidiizng this oil company and secret deals by Idaho Governors..let exxon haul their stuff on the freeways like EVERYONE else has to do!!!!!!!!!!!!!!!!!!!!!!!!! Maybe even manufacture the modules in Montana and really put some folks to work!

Dub
Dub

Next time you fill up your car or pay your heating bill, give a silent prayer thanking our commissioner for pushing the rates higher. Just think, if we had extra money to spend, they could raise our property taxes, shut down more businesses and promote more "green" jobs. Maybe even give more money to out of state land owners for conservation easements--aren't we just the lucky ones!!!

MontanaTom
MontanaTom

Ya, that drive will never be the same now that those big rigs have tarnished the highway with such devastating impacts on the pavement and the surrounding animals and forestry! LMAO! You know, I'm really not sure what these protesters are smoking but congrats to them for costing yet another company millions or even billions of dollars for no apparent reason!

TourGuide
TourGuide

The people protested because there was a reason to protest- same reason why they filed the lawsuits.

If you have a position that you strongly about, feel free to get off the couch and do something about it. I do indeed I hope to see you at the next protest holding a sign that says: Pollute the entire globe! Destroy every inch of it! Protect Exxon's profit margin!"

If you cant do that then what are you complaining about?

TourGuide
TourGuide

Boy that's great Frenchy - a total detachment from the facts. And those facts are that there is a surplus of domestic oil, production is up, gas prices are steady, and natural gas prices are falling. In addition, renewables are on the rise...

Yeah, I ain't worried about it. And I ain't concerned about what some hillbilly "expert" up in TC has to say about it either.

Now off for a bike ride!

RPT
RPT

Guess you didn't get the memo.... "NorthWestern Energy rates to rise despite PSC rejection"
HELENA – Montana’s Public Service Commission wouldn’t vote for a $12.5 million annual rate increase for NorthWestern Energy customers last week – but the rate hike took effect anyway.

Not to worry ..It'll be in your next months power bill.

TourGuide
TourGuide

That would be a valid point if there was a connection between NorthWesternEnergy's rate increase and the mega-loads/exploitation of the Alberta Tar Sands. But there is not. Had you read the second paragraph of the very same article you reference, you would have seen this gem:

"The increase for electric and natural gas ratepayers served by NorthWestern is required by state law, which says the utility can charge enough to cover what it pays in state and local taxes – mostly property taxes."

Amazing how very blind people allow themselves to become.

frenchy
frenchy

All you little bicycle riding greenie-weenies down there in Missoula start complaining about your rising energy cost, you have it coming. If all you commie loving hippies want to ride bicycles instead of driving , go to China!
Frenchy
Trout Creek

The_Boneshackler
The_Boneshackler

The Missoula County Commissioners inadvertently created real jobs. Not just low-wage flagging jobs and Highway Patrol overtime....

“This was an enormous work effort … involving hundreds of workers for more than a year,”

TourGuide
TourGuide

You don't like it Idiot State your free to leave anytime.

idiot state
idiot state

Thanks, Missoula, for your legal interference in this.You're even more brilliant and charming than we'd thought. Always, always on the right side of things. Idiot town in an idiot state. Now go smoke your dope and hop on your bike and plan your next wonderful move....

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.