Nov. 25 (Bloomberg) -- Petro-Canada, the country’s third- largest oil company, won’t proceed with the next phase of its Fort Hills oil-sands project unless Alberta’s government agrees to new lease terms, Chief Executive Officer Ron Brenneman said.

Brenneman commented on the status of the C$25.3 billion ($20.7 billion) project during a conference call today with analysts and investors. Calgary-based Petro-Canada and its partners on Nov. 17 said Fort Hills was delayed because of rising costs and plunging oil prices, and lease terms were being renegotiated.

Petro-Canada holds a 60 percent stake in the Fort Hills project, and Calgary-based UTS Energy Corp. and Vancouver-based Teck Cominco Ltd. each has a 20 percent interest. The project had been expected to produce 280,000 barrels of oil a day by 2015.

About C$1.7 billion has been spent so far on Fort Hills, Neil Camarta, Petro-Canada’s senior vice president for oil sands, said on a Nov. 17 conference call.

Petro-Canada rose C$1.16, or 4.7 percent, to C$25.91 on the Toronto Stock Exchange.

Imperial Oil Ltd., owned 70 percent by Irving, Texas-based Exxon Mobil Corp., is Canada’s largest oil company by sales, followed by EnCana Corp.

To contact the reporter on this story: Dan Lonkevich in New York at dlonkevich@bloomberg.net.

Last Updated: November 25, 2008 16:12 EST