Imperial Oil still working out the kinks at Kearl oil sands mine

|About: Imperial Oil Ltd (IMO)|By:, SA News Editor

Imperial Oil (IMO, XOM) has spent more than expected in ramping up production at its Kearl oil sands mining operation in Alberta, but CEO Rich Kruger believes the company has learned enough from the problems to ensure a smoother start when it opens the C$8.9B second phase later this year or early next.

Production at Kearl averaged 70K bbl/day in Q1, up from 52K bbl/day during last year's Q4 but still well below the 110K capacity.

Operating costs of $30/bbl for the initial phase for exceeded some analyst expectations of $20/bbl, and RBC now expects operating costs of $29-$32 falling to $24-$28 once the second phase starts up; by contrast, Suncor (SU) expects operating costs for its Fort Mills mine at $20-$24/bbl.

Despite the start-up problems, Kruger says the heavy oil produced at Kearl is gaining wide acceptance from refiners; ~21 North American refineries have bought the oil, while a refinery in Malaysia also acquired some cargoes by tanker from the Port of Vancouver.