copyright/courtesy Nexen Inc.

The credit crunch and falling oil prices have combined with strong North American demand for heavy crude oil to strike a blow at Canada’s oil sands projects in western oil province Alberta, where yesterday a second big bit of plant was “delayed” on credit fears.

Petro-Canada said it will move ahead on its $18.8 billion Fort Hills oil sands mine but might delay spending on a related heavy oil upgrader, this despite reporting Thursday that oil sands earnings had doubled along with company profit. The move will still produce greater volumes for partners Petro-Canada, Teck Cominco and UTS Energy, but other plant might have to be fed.

Suncor Energy Inc. said yesterday it will cut spending by one-third in 2009 on credit and commodity price fears, and the cut clipped funding for the planned Voyageur project upgrader.

Suncor said it was “scaling down” spending and construction at the upgrader, delaying completion by a year.

"What we're doing is announcing a change in how we execute this project — we're not mothballing it, we're not stopping it," chief exec Rick George said in a conference call.

Instead, Suncor’s board approved $6 billion in capital spending for 2009, $3.6 billion of which was earmarked for the rest of Suncor’s Voyageur oil sands project.

Yet Suncor is still targeting 550,000 bpd, George said, adding that given credit crunch “capital pullbacks”, he saw no difficulty marketing bitumen through to 2012.

On top of Voyageur, Suncor still intends to bolster oil sands spending by $1.7 billion, including much for emissions control.

Meanwhile, demand for North American heavy crude is higher, so less synthetic crude needs to be made, cutting the value in an upgrader.

Still, this week, joint venture partners OPTI Canada. and Nexen opened Canada’a fourth-largest integrated oil sands project at Long Lake Alberta, where on-site gasification and upgrading are being started up. Upgrading from 23,000 barrels per day is being ramped up to between 60,000 bpd and 70,000 bpd as equipment is tested and comes onstream.

Goerge also warned that $80 kept oil sands “easily financable” without saying what less than that meant for the industry’s billions in upgraders. But he said “there was a lot of flexibility” on how long the building of of an upgrader can be delayed.

“After 11 dollar oil, you gotta have a lot of faith in this business,” he said, adding that oil sands businesses would still be making money if times became leaner and poised to.

ws@scandoil.com

Tags: Petro-Canada, Suncor Energy Services Inc.