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Production costs have soared worldwide as resources become more difficult to extract.TODD KOROL/Reuters

Statoil ASA's Canadian unit, facing investment decisions for its Alberta oil sands operations and major new oil finds off the Newfoundland coast, may be forced to choose between them as the Norwegian oil giant seeks to keep costs down in operations around the world, the head of Statoil Canada said.

The company is slated to decide by March whether to go ahead with a multibillion-dollar oil sands project called Corner that would help more than quadruple its output in the region south of Fort McMurray, Alta.

In 2014, it also seeks to drill more wells in the Flemish Pass region of the North Atlantic, where the company and its partner, Husky Energy Inc., made a third large discovery in the area last summer. That find, called Bay du Nord, could contain up to 600 million barrels of oil.

"That's a possibility [one taking precedence over the other]," Statoil Canada president Stale Tungesvik said.

"It could be kind of a re-prioritization in the worldwide portfolio. When that will hit us some place in Canada, I'm not sure yet. I'm still fighting for doing both, so that's my … position. But there is the bigger picture. There has to be some changes."

The company's dilemma highlights the soaring costs the industry is facing in Canada and worldwide, as resources get more difficult and expensive to extract, whether separating tar-like crude from the oil sands with steam injected deep into the ground, or securing complex rigs for ever-deeper offshore prospects.

Mr. Tungesvik said the energy industry is dealing with proportionately similar cost pressures today as it was 10 years ago, even though crude has risen to $100 a barrel from about $30.

"We invest more than ever, but we see that it's much more costly to develop one barrel of oil today than it was earlier so we are, and all the other companies are, or have been doing, kind of looking through the portfolio to see, what should we do first." he told reporters. "So there is change in the whole industry. … I think we are in the middle of that."

Calgary-based producers including Encana Corp. and Cenvous Energy Inc. have in recent weeks announced conservative capital spending budgets for next year and served notice that a run of asset sales will continue as a way to raise cash and direct budgets to the best prospects.

Statoil is now running the numbers on the Corner project, which would be its second oil sands venture following the Leismer, Alta., development, where it also plans to expand to double output to 40,000 barrels a day. Those cost estimates will determine whether the project will proceed as planned.

Meanwhile, drilling plans for the Flemish pass prospects could be complicated by difficulties securing a rig, he said.

Bay du Nord is 500 kilometres northeast of St. John's. The other two finds are Harpoon, announced in June, and Mizzen, drilled in 2009.

All three, in water depth of just over a kilometre, could be developed together some time after 2020, the firms have said. Statoil has a 65-per-cent stake and Husky the remainder.

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