CALGARY (CP) -- Synenco Energy Inc. [TSX:SYN] will use workers in Asia to build giant modules for its Northern Lights oilsands project, saving C$1.2 billion in construction costs and slashing the need for labour by more than half in Alberta's over-heated economy.
''This is a very innovative and great solution for all concerned,'' Synenco president Todd Newton said Wednesday, estimating the pricetag for the revamped project in northern Alberta at C$4.4 billion.
A major Chinese oil company is a partner with privately owwned Synenco in the oilsands project.
''Our strategy is going to be very different from other oilsands developers, but it's one we think is best for our company,'' said Newton. ''Overseas execution allows labour costs... to be reduced dramatically.''
A traditional Alberta oilsands construction model would require 2,000 field workers at the peak of construction and cost C$5.6 billion, he said. This approach reduces that to about 900 workers.
Cost savings from labour will be transferred into transportation and equipment contracts, which are less volatile and easier to schedule.
The modules, which will be about 12 times the size of those traditionally fabicated for oilsands plants, will be shipped from a plant in likely China or South Korea. The 2,000-tonne units will move through the Bering Strait and down the Mackenzie River before being assembled onsite north of Fort McMurray, Alta.
''Well-known global leaders in transporation have confirmed the viablility of this route for (moving) the modules we intend to have fabricated and brought to the site,'' said Newton.
Calgary-based Synenco says its plan will keep the mining project on schedule and on budget.
Other energy companies in the oilsands have seen their pricetags spiral by billions as they struggle to cope with a shortage of tradespeople and skilled workers, escalating material costs and equipment shortages.
Synenco, which has a 60% share of Northern Lights and will manage the operation, says its C$4.4 billion cost estimate could still vary between 30% higher and 10% lower than estimated.
SinoCanada Petroleum Corp., an indirect wholly owned subsidiary of Chinese oil giant Sinopec, owns the remaining 40%.
Newton says Synenco's plan reduces demands on local infrastructure, lower the environmental disturbance of construction and will be good for Alberta taxpayers.
Alberta allows energy developers to pay a one-per cent royalty rate until their capital construction costs are covered.
''If your capital costs are lower, then you're going to start paying taxes at the higher rate a lot faster,'' said Alberta Energy spokesman Jerry Bellikka, noting that of 33 of the more than 60 oilsands operations in the province are at payout. That means they pay the 25 per cent net royalty before taxes.
Synenco estimates that Northern Lights deposit holds 1.67 billion barrels of tar-like heavy oil called bitumen, up from a 2005 estimate of 1.49 billion barrels. Synenco says the project holds 1.3 billion barrels of recoverable resource, which will result in about 30 years of production at 100,000 barrels of synthetic crude a day.
Synenco did not have a cost estimate for its planned Sturgeon upgrader near Edmonton, which is to refine up to 100,000 barrels of the bitumen, but will not have a capital cost estimate on that project until sometime in 2007. The company is also looking at using modules from Asia to control costs.
''An integrated business model we believe is the most secure and robust,'' said Newton. ''We remain fully committed to downstream integration and the full integration of bitumen production with upgrading.''
Looking to 2007, the company expects updates on its regulatory applications for the Northern Lights project.
Synenco's shares fell C$1.31 to C$14.68 in Wednesday trading on the Toronto Stock Exchange.
© The Canadian Press 2006
