Start Your Engines: Suncor CEO Marks Official "Restart" in Oil Sands Growth
Suncor Energy, Canada’s largest energy company by market capitalization, will spend $1.4 billion next year on efforts to boost oil sands production.
In short, the company is sending a message: the oil sands are back. Not that Canada’s vast and murky mix of bitumen, sand, clay and water had disappeared.
Canada’s estimated 173 billion barrels of hard-to-reach oil has been sitting pretty, waiting for a global recession to end, crude prices to rise and operating costs to fall.
That dim view has brightened lately for the oil sands industry, with crude prices above $75 a barrel, falling operating costs and Korea National Oil Corp.’s acquisition of oil sands company Harvest Energy. Now Suncor is starting up projects that have been on hold for months.
Suncor, which bought Petro-Canada this year, announced it will spend $5.2 billion (C$5.5 billion) in 2010. About 27 percent of its capital spending plan will go towards oil sands growth including its Firebag 3 expansion, a project that was 50 percent complete when it was put on hold earlier this year.
“I see no reason that we can not grow oil sands production at a rate of around 10 to 12 percent on average, per year through 2020,” said Suncor president and CEO Rick George during a conference call with investors. “This officially restarts the growth in oil sands.”
The Firebag 3 expansion is expected to begin production in the second quarter of 2011, George said. The stage 4 expansion has a target of first bitumen production in the fourth quarter of 2012.
George said the company expects a 15 percent return on a $70 WTI crude price.
This doesn’t mean Suncor is going to throw caution to wind and embark on a number of new oil sands projects. On the contrary, Suncor’s George said folks should expect a more disciplined approach.
“I do not want to go back to a world where we were making $10 billion project commitments upfront and then, at some point, have to pull back,” he said.
This means, that its Voyager upgrader project, which is designed to process the heavy bitumen it extracts and later sell it to U.S. refiners – will remain on hold. Construction on Voyager was stopped in January and George’s comments Friday and during its second-quarter conference call in July indicate the project won’t start up anytime soon.
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Kirsten Korosec has been a print and online journalist for more than 10 years covering education, politics and business.
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