Suncor Expects Oil Sands Production to Restart in 3Q05

Athabasca Oil Sands
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Suncor Energy says preliminary assessment of the damage caused by an early January fire indicates production at its oil sands facility should return to full rates sometime during the third quarter.

"The recovery plan is focused on investigating the cause of the fire, completing a damage assessment, completing repairs, and working to mitigate the impact of the outage to Suncor and its customers," said Rick George, president and chief executive officer. "Our employees have the experience and expertise to get the work done safely and thoroughly and I know they'll do their best to return to full production sooner, if possible."

The timeline for recovery work is preliminary and subject to change. Further inspection of the damaged equipment will occur as the repairs progress. Any new information could modify the timetable for returning to full production.

During the repair period, oil sands production is expected to average about 110,000 barrels per day (approximately half of the plant's normal capacity) plus bitumen production from in-situ operations.

To mitigate the impact of reduced production during the recovery period, Suncor will bring forward as many maintenance projects as possible, including all, or significant portions of, a maintenance shutdown previously planned for the fall.

Suncor's capital spending plans for 2005, including work to increase oil sands production capacity to 260,000 barrels per day by year end, have not changed.

"Despite this near-term setback, Suncor's longer term growth strategy remains very much intact and we expect to make major strides this year," said George.

The cause of the fire is still not known and damage estimates are not yet available. The fire, which occurred Tuesday, January 4, was located in one of the company's two oil sands upgraders. Damage appears to be primarily limited to a coker fractionator and supporting equipment such as structural steel, piping, electrical supply and heat tracing. Suncor carries property loss and business interruption insurance policies with a combined coverage limit of up to US$1.15 billion. As a result, the financial impact to Suncor is expected to be substantially mitigated until full production is resumed. The property loss deductible is US$10 million. The deductible for the business interruption policy is subject to a 30-day waiting period on the first US$200 million worth of coverage and a 90 day waiting period on the remaining coverage.

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