Big Bucks: Suncor Approves C$20.6B Oil Sands Expansion Plans
Suncor Energy announced that its Board of Directors has given final approval to a $20.6 billion investment that is expected to boost crude oil production at the company's oil sands operation, located north of Fort McMurray, by 200,000 barrels per day (bpd).
The Board's decision is a key step in achieving Suncor's long-term goal of responsibly increasing crude oil production capacity to 550,000 bpd in 2012 — and follows through on a growth strategy that Suncor first announced in 2001.
"Our long term growth strategy called for us to double our business and now, with the Board's support, we're constructing an expansion project that is thoroughly planned and engineered," said Rick George, Suncor's president and chief executive officer. "The years of pre-work leading up to this point will also help us deliver another commitment to our stakeholders — that we would work to ensure all future growth is completed in a safe, reliable and environmentally responsible manner."
The expansion plans include constructing four additional stages of in-situ bitumen production, a new upgrader (Suncor's third) to convert that bitumen into higher-value crude oil, and various infrastructure and utilities.
"Suncor's business has historically relied on oil sands mining. This expansion puts in-situ development on a more equal footing to our mining operations and proves again how investments in new technologies can enable business to grow, while also allowing us to reduce our environmental footprint," said George. Suncor's in-situ operations disturb only about 15% of land, as compared to oil sands mining and more than 90% of the water needed for the process is recycled.
Of the estimated total of $20.6 billion, Suncor has already invested approximately $2.5 billion on the expansion, including detailed engineering, site work and fabrication of major vessels. In addition, Suncor's consultation with stakeholders has resulted in a project designed to mitigate many of the environmental impacts oil sands development creates.
One area of particular focus is improved water management. Having already reduced water withdrawals from the Athabasca River, Suncor plans to proceed with this expansion without requesting any increase to its water licence. The project also calls for emission abatement equipment and sulphur handling systems to be installed to improve air quality and reduce odours, while new equipment and processes are also in the plan to improve energy efficiency.
"Suncor strives to combine strong financial results with equally robust environmental performance," said George. "We believe this latest investment marks an exciting new chapter for our company as we invest in both expanding our business and working to improve our environmental performance."
The expansion is designed to be completed in a phased manner. Mechanical completion of the new upgrader is expected to be completed in 2011, while bitumen feed from the new stages of in-situ production is expected to begin operation in 2009 through 2011. Crude oil production is expected to begin ramping up in late 2011, with full production capacity of 550,000 bpd expected to be achieved in 2012. Suncor's plans for some components of in-situ expansion are still subject to regulatory approval and, as such, the company's schedule is subject to change.
The capital required to fund the expansion is expected to be financed through cash flow from operations, credit facilities and access to debt capital markets.
"While we are firmly committed to our growth plans, we're also placing a strong focus on the efficiency and productivity of our existing operations," said George. "How we perform on safety, reliability, operational costs and environmental performance sets the foundation for what our stakeholders can expect in the future."
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