Statoil has announced it will postpone a multibillion-dollar oilsands project near Fort McMurray, Alta., because of rising costs.
Statoil Canada country manager Stale Tungesvik said limited opportunities to get oil to market from the region also played into the decision.
“Costs for labour and materials have continued to rise in recent years and are working against the economics of new projects,” he said in a press statement Thursday.
“Market access issues also play a role — including limited pipeline access which weighs on prices for Alberta oil, squeezing margins and making it difficult for sustainable financial returns. “
It has been planning the steam-driven project, called Corner, but the project is now on hold for at least three years.
About 70 people could lose their jobs.
Bought into oilsands in 2007
Norwegian-based Statoil bought the Kai Kos Dehseh oilsands project when it acquired North American Oil Sands Corp. in 2007 for $2.2 billion. In 2011, it took on Thai firm PTT Exploration as 40 per cent partner.
Earlier this year, Statoil divided its oilsands leases with PTTEP, and Statoil took 100 per cent ownership of the Leismer and Corner projects. The Leismer steam-driven project is in production with an operating capacity of 20,000 barrels per day.
Statoil's Corner is one of several oilsands projects put on hold because of cost concerns, including Total’s Joslyn oilsands project earlier this year.
The costs of oilsands projects are rising because of construction and labour costs, while the price of oil is 20 per cent lower than it was six months ago, making large investments less viable.
The uncertainty over pipeline projects also discourages investment, with the Keystone pipeline to the U.S. stalled in the White House and the Northern Gateway pipeline facing multiple hurdles.