Canadian Natural Resources warned Tuesday that cold weather could boost the cost of Phase 1 of its Horizon oilsands project in northern Alberta by up to $1.9 billion.

In its quarterly report on the huge project, Canadian Natural said if there are no improvements in productivity during the remainder of the construction period, the cost estimate for the first phase would need to be increased by 28 per cent — an extra $1.9 billion on top of the originally authorized $6.8 billion cost.

Cold winter weather is boosting the construction cost of Phase 1 of the Horizons oilsands project, but should not delay the first oil.
(Canadian Press)

The company said it could reduce the overrun to $1.7 billion "if we can regain targeted labour efficiencies and productivity."

As recently as Dec. 31, Canadian Natural had estimated the cost overrun at $911 million. Last May, it estimated the extra costs at between $340 million and $816 million. 

But tough winter weather has thrown those earlier estimates out the window.

"Mid to late January and early February saw a significant deterioration in labour productivity on the construction site as much colder-than-normal weather seriously curtailed activity," said vice-president Real Doucet Sr. 

Despite the bad weather and productivity problems, the first oil is still scheduled to be produced in the third quarter of this year. 

About 90 per cent of the Horizon project has been completed.

Canadian Natural shares were up 23 cents to $63 in early TSX trading Tuesday.