(Adds background on Fort Hills project, comment on Total's withdrawn bid for UTS)
OTTAWA -(Dow Jones)- Estimated costs for Petro-Canada's (PCZ) delayed Fort Hills oil sands mine have sunk 30% to below C$10 billion, the company's chief executive Ron Brenneman said Tuesday.
The savings from the earlier estimate of "C$14 billion and change" reflect lower global steel prices, less escalation in wage rates and better labor productivity amid the slowdown in the oil sands, Brenneman said on a conference call.
"It's a pretty rough estimate but it's pretty encouraging...that even on a standalone basis we can generate a double-digit return [with oil prices] at $60 a barrel," he said.
Petro-Canada, which owns a 60% stake in Fort Hills, has also cut estimated operating costs for the project, Brenneman said. UTS Energy Corp. (UTS.T) and Teck Cominco Ltd. (TCK) each hold 20% apiece.
Petro-Canada is currently being taken over by Suncor Energy Inc. (SU), which would create Canada's biggest energy company with a major presence in Alberta's vast oil sands, the world's biggest crude reserve outside Saudi Arabia.
Plans for the Fort Hills oil sands development originally incorporated the mine and an upgrading facility, which would process the sludgy oil sands bitumen into a higher-quality synthetic crude. But in September, estimated costs for the combined project soared more than 50% to top C$28 billion, forcing the Fort Hills partners to delay the mine while they worked to bring down costs.
The upgrader has been put on hold indefinitely and will likely be scrapped, as Suncor already operates two upgraders and has delayed plans for a third.
Separately, Brenneman reiterated that Petro-Canada is "comfortable" with its 60% stake in the project, following news that French oil major Total SA (TOT) has withdrawn its hostile bid for UTS.
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@dowjones.com