​Teck says Fort Hills construction is progressing well, updates Frontier

Fort Hills mModules being fabricated at the ENGIE Fabricom yard near Edmonton earlier this year. Image: Aaron Parker/JWN

Construction of the Fort Hills oilsands project is “progressing well” and has surpassed 60 per cent completion, 20 percent partner Teck Resources reported in its Q2/2016 results.

During the second quarter of 2016, wildfires in the Fort McMurray area suspended project construction for approximately four weeks. There was no damage to the Fort Hills project or any of its associated infrastructure and work on the project recommenced in early June, Teck says. Despite the suspension, the company still expects to produce first oil by late 2017.

Suncor Energy Inc., the operator of the project, is currently assessing the impact of the wildfire interruption, including schedule mitigation strategies and expects to be in a position to provide an update on the project at the end of the year once the module programs are complete and the site has reached peak construction levels.

Notwithstanding the progress to date, achievement of cost and schedule targets will depend on a number of factors including timely material deliveries and maintaining good labour productivities as the project moves through peak construction, Teck says. A weaker Canadian dollar has increased costs for the portion of plant and equipment purchased from foreign jurisdictions.

Teck's share of Fort Hills cash expenditures in 2016 is estimated at $960 million, $231 million of which was spent in the second quarter.

“Engineering is essentially complete and construction is progressing well and has surpassed 60 per cent completion. First oil is expected near the end of 2017, with 90 per cent of our gross planned production capacity of 180,000 barrels per day expected within 12 months,” the company stated. “Our share of production is expected to be 36,000 [barrels per day] (13 million barrels per year) of high-quality bitumen.”

Teck says it is continuing to review options to sell diluted bitumen into the North American and overseas markets which may include the use of pipelines from Hardisty, Alberta or rail to access U.S. Gulf Coast refineries and tidewater ports.

Frontier project

The Frontier project regulatory application review continues with the provincial and federal regulators signing the joint panel agreement and appointing three members to the Frontier hearing panel.

The regulatory review process is expected to continue through 2016, making 2017 the earliest a federal decision statement is expected for Frontier.

“Our expenditures on Frontier are limited to supporting this process. We are evaluating the future project schedule and development options as part of our ongoing capital review and prioritization process in response to current market conditions,” the company stated.

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