Suncor's Board gave final approval to the expenditures required to construct a $2.1 billion upgrader expansion, which includes the addition of new coking facilities. To feed the expanded upgrader, Suncor also plans to spend an estimated $1.5 billion to boost bitumen production at the company's in-situ and mining and extraction facilities. Bitumen from third parties is also expected to supply the expanded upgrader. Final Board approval for some components of the bitumen production plan are still pending. Regulatory approval for the expansion was granted earlier in 2004.
The combined $3.6 billion investment in upgrading and bitumen production is expected to increase Suncor's oil sands production capacity to 350,000 barrels per day in 2008. Engineering for the project is approximately 50% complete. Preliminary fieldwork, foundation construction and the manufacture of major vessels and equipment are in progress. Cost projections include current estimates for material and labor costs.
"Increased oil sands production is central to our long-term strategy," says Rick George, president and chief executive officer. "With our staged approach to growth, we expect to expand production steadily, reliably and at a competitive cost."
This project, as well as other expansion projects currently being undertaken by Suncor, are key components of the company's Voyageur growth strategy - a multiphase plan to increase production to more than a half million barrels per day in the 2010 to 2012 time frame.
In 2005, the company expects to spend $2.5 billion, an increase of approximately 47% over 2004 capital spending. Spending plans include:
To support longer-term growth, Suncor expects its capital spending to average $2.3 billion to $2.5 billion per year. Suncor's plans target increasing oil sands production by an average 8% to 10% annually, while earning a 15% return on capital employed at US$28 WTI benchmark crude prices.
"Suncor's long-term capital investment plans remain squarely focused on our integrated business strategy - increasing oil sands production and earning a solid return on our investment," said George. "While we invest for future growth, Suncor will remain focused on managing debt and maintaining a strong balance sheet."
Cost estimates are, by their nature, uncertain and can be subject to wide variances as engineering is developed and even as construction progresses. Estimates are subject to revisions, which may be material.
All amounts are in Canadian dollars, unless otherwise noted.
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