Canadian Natural Resources Ltd (TSE:CNQ) was hammered by inflation at its last phase of its Horizon oil sands project, which came in over budget to the tune of 43 percent.
The first phase of the Horizon project cost C$9.7 billion to develop, equal to about C$80,000 per barrel of daily production. Canadian Natural President Steve Laut said he expects the second phase to be even more expensive than the first.
Laut said at an investor meeting, "The biggest concern for us is not so much what the cost is, but is there going to be escalation, can we handle the inflation that might come at us?"
With a number of their competitors like Devon Energy Corp (DVN.N), Imperial Oil Ltd (TSE:IMO) and Cenovus Energy (NYSE:CVE) starting up projects they have on hold, competition for materials, vendors and contractors with experience, could end up with prices rising even further.
To try to manage that, Laut said "we've got to have a very robust execution plan. We've to have enough flexibility that we can pull enough levers if costs start to take off on us."
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