The costs of Nexen’s Long Lake oil sands project will increase “10 to 15 percent” to as much as $6.1 billion after “lower than expected labour productivity” forced delays setting up a heavy oil upgrader plant.

No start up is expected before first-quarter 2008, with first synthetic crude output not before the spring. The upgrader and a problematic sulphur recovery unit must first be built.

The Calgary-based oil company said “Phase 1” was underway with the start-up of steaming in four of 10 wells. Bitumen production is set to reach full rates over the next two years.

While the slower-than-expected construction continues, all else appears to be on target.

“We expect construction of the hydrocracker, the OrCrudeTM unit and all main plant utilities to be completed in the third quarter of 2007,” a statement said. Completing the gasifier and air-separation units is expected to extend into the fourth quarter of 2007, while completion of the sulphur-recovery unit is now expected in the first quarter of 2008.

The company said pipe-fitters were especially hard to get hold of under a skilled-labour crunch that appears to have been resolved. Nexen’s share of Long Lake costs were once pegged at $2.65 billion.