Imperial Oil said Monday that its board of directors has approved the go-ahead of the first phase of the Kearl oilsands project.
The Kearl project, which is located 70 kilometres northeast of Fort McMurray, Alta., is ultimately expected to produce more than 300,000 barrels a day of bitumen. The first phase of the project is expected to begin production in late 2012 with total production to average 110,000 barrels per day.
The company said the first phase of the project is anticipated to cost about $8 billion or approximately $4.50 per barrel to construct.
In August 2008, the company announced it had delayed a decision whether to proceed with Kearl, citing a successful environmental challenge and design revisions to the project for increasing costs.
Imperial says the total recoverable bitumen at Kearl is estimated at 4.6 billion barrels.
Oil is trading in the range of $61 per barrel, after plunging to just over $30 a barrel earlier this year.
University of Calgary economics professor Frank Atkins said the price of oil is still low to be going ahead with an oilsands development, but added that some costs have gone down.
"Labour costs have gone down and construction costs have gone down, raw material prices have gone down, so it's making the project look more viable," he said. "But of course enviromental costs have gone up commensurate with that, so it's sort of a see-saw sort of a pattern here."
Atkins said that while the price of oil is nowhere near where it was last year, it is firming up. He said that may convince other energy companies to go ahead with their projects, too.