Sept. 17 (Bloomberg) -- Petro-Canada, the country's second largest refiner, estimated costs to develop its Fort Hills oil- sands project in Alberta, Canada, have increased by 50 percent since a memorandum in June 2007.

The increase stems from the price of construction materials, labor, project management and engineering, Petro-Canada said in a statement today. An investment decision will be made in the fourth quarter after completion of the engineering and design plan, the company said.

Calgary-based Petro-Canada, which holds a 60 percent stake, and its partners UTS Energy Corp. and Teck Cominco Ltd., which both hold 20 percent, had forecast spending C$14.1 billion ($13.1 billion) on the project's first stage, Petro-Canada said.

UTS fell as much as 53 percent and was down 83 cents at C$1.57 as of 10:41 a.m. in Toronto trading. Petro-Canada dropped 1.9 percent to C$38.93. Teck Cominco fell 1 cent to C$37.62.

Petro-Canada plans to produce 140,000 barrels a day of synthetic crude from the fields, with initial output from the Sturgeon upgrader in the second quarter of 2012.

It estimates associated bitumen production of 160,000 barrels a day with initial production in the fourth quarter of 2011, Petro-Canada said in the statement.

Imperial Oil Ltd. is the country's largest refiner.

To contact the reporter on this story: Stephen Bierman in London ext 4139 sbierman1@bloomberg.net.

Last Updated: September 17, 2008 10:48 EDT