UPDATE 1-Project halt prompts Petro-Canada to cut 200 jobs

Wed Apr 15, 2009 5:18pm EDT

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CALGARY, Alberta, April 15 (Reuters) - Petro-Canada PCA.TO has laid off nearly a third of the workers in its oil sands division as its major project, the C$21-billion-plus ($17-billion-plus) Fort Hills venture, remains stalled in the oil industry downturn, the company said on Wednesday.

Petro-Canada, which is in the process of being taken over by Suncor Energy Inc (SU.TO), has given out 200 layoff notices this week, spokeswoman Kelli Stevens said.

Stevens stressed the cuts are not related to the takeover, which won U.S. antitrust approval on Wednesday.

"The major thing is definitely Fort Hills," she said. "We've got that project on hold and we've tried to keep people busy by working down the costs on the project and other tasks related to its future. But as time goes on we have more people than we have work."

Petro-Canada would be the operator of Fort Hills, in northern Alberta, once it is built. The estimated cost of the project took a big jump last year, just before oil prices tumbled. Petro-Canada's partners in the project are Teck Cominco Ltd (TCKb.TO) and UTS Energy Corp UTS.TO, which is itself a takeover target for French oil major Total SA (TOTF.PA).

The development is among more than C$90 billion worth of Alberta oil sands projects that have been deferred or canceled since last October as energy and financial markets were thrown into disarray by the recession.

Suncor has put a C$20.6 billion expansion of its oil sands plant on hold as well.

The layoffs extend a recent spate of job cuts in the sector. So far it has been contractors to the oil sands developers that have been forced to cut deepest.

At the end of 2008, Petro-Canada employed 6,000 people in total and its oil sands division had about 700, including some employees in shared-services roles.

Stevens said no more job cuts are expected before the takeover by Suncor closes sometime after shareholders vote on the deal in early June.

($1=$1.21 Canadian) (Reporting by Jeffrey Jones; editing by Peter Galloway)

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