Canadian Manufacturing

Suncor says cost of new Fort Hills oilsands mine could rise to $17B

The energy company blamed last year's wildfire and planning changes for the higher price tag; costs could reach $1.9 billion over previous estimate



CALGARY—Suncor Energy Inc. is blaming delays caused by last spring’s devastating Fort McMurray, Alta., wildfire, along with construction changes to boost capacity, for a $1.4-billion to $1.9-billion increase in the estimated cost of its Fort Hills oilsands mining project.

The company says the project, which was 76 per cent complete as of Dec. 31, is now expected to cost $16.5 billion to $17 billion, up from the previous estimate of $15.1 billion.

It says that the cost per barrel, however, will remain at about $84,000 per flowing barrel of bitumen because nameplate capacity has been increased to 194,000 barrels per day from 180,000 bpd.

Suncor says its share of Fort Hills’ remaining project capital is between $1.6 billion and $1.8 billion and most of that will be spent this year, with production expected to gradually ramp up through 2018.

The project is owned 50.8 per cent by Suncor, 29.2 per cent by Total SA and 20 per cent by Teck Resources Ltd. In a statement, Teck said it will record an after-tax impairment charge of $164 million in its fourth-quarter results because of the higher cost.

Suncor also reported its financial results late Feb. 8. The energy company posted net earnings of $531 million or 32 cents per share in the fourth quarter of 2016 on higher oil prices and better production, compared with a net loss of $2 billion or $1.38 per share in the same period of 2015.

The earlier net loss included $1.6 billion of non-cash impairment charges and an unrealized after-tax foreign exchange loss of $382 million on the revaluation of U.S. dollar denominated debt.

Suncor reported record production of 738,500 barrels of oil equivalent per day in the fourth quarter, compared with 582,900 boe/d in the fourth quarter of 2015, due mainly to a larger share of the Syncrude oilsands mining consortium and record Syncrude operating results.

“Our cost reduction efforts have resulted in significant savings in the year, well exceeding the targets we set out in early 2016, and the improvement in Syncrude’s reliability in consecutive periods has been impressive,” said CEO Steve Williams in a statement.

“We have achieved a step change in operating efficiency this year, which has resulted in cash operating costs per barrel at our oilsands operations being consistently below $25, excluding the impact of the forest fires.”

Suncor raised its quarterly dividend by three cents to 32 cents per share.

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