UPDATE 1-Imperial says initial Kearl project to cost C$12.9 bln

Feb 1 (Reuters) - Imperial Oil Ltd said its final cost of initial development of the Kearl oilsands project in Alberta is expected to be C$12.9 billion ($12.9 billion), C$2 billion more than earlier projections, due to transportation delays and harsh weather.

The cost to develop the project is now estimated to rise by 10 percent to $6.80 per barrel, Canada's second-largest oil producer and refiner said on Friday.

Imperial, majority-owned by Exxon Mobil Corp, said production at the initial Kearl project would ramp up to 110,000 barrels per day over the next several months.

The company said the Kearl expansion project, sanctioned in 2011 for C$8.9 billion, was 27 percent complete at the end of the fourth quarter. It is expected to start production in 2015.

Imperial, which also reported a 7 percent rise in fourth-quarter profit, said earlier this month that start-up of the Kearl project had been delayed by cold weather.

Oil traders have said that expectations of production from the Kearl development have been a factor in the deepening of discounts on Canadian heavy oil, as export pipeline capacity remains limited.

The Kearl project is a joint venture between Imperial and Exxon.

Imperial said earnings rose to C$1.08 billion, or C$1.26 per share, from C$1.01 billion, or C$1.18 per share, a year earlier, helped by higher refining margins due to cheaper North American crude prices.

Revenue fell 4 percent to C$7.8 billion.

Production dropped to an average of 285,000 barrels of gross oil-equivalent per day, from 291,000 a year earlier.

Imperial is the first major Canadian oil company to report results for a period during which the price of oil sands-derived crude slumped in comparison to other North American and international types due to tight pipeline capacity and surging overall output.

Imperial shares closed at C$43.80 on the Toronto Stock Exchange on Thursday. They are down about 8 percent in the past year.