Suncor: Fort Hills mine production delayed until 2017
by The Canadian Press
Focus shifted to profitability and quality rather than meeting stringent timelines.
CALGARY—Suncor Energy Inc. expects crude from its Fort Hills oilsands mine to start flowing a year later than previously thought and says ever-growing production from places like North Dakota is a challenge to the economics of its Voyageur upgrader.
Those two projects, as well as the Joslyn mine, are part of a $1.75-billion joint venture Suncor inked with French energy giant Total SA in 2010. The partners are undertaking a review of those three projects in an effort to drive down costs.
“We haven’t completed the review, but early indications are that we’ve been able to add significant value to the mining projects,” CEO Steve Williams told analysts on a conference call Thursday to discuss Suncor’s third-quarter results.
“However, the production timeline for Fort Hills is likely to be delayed by about a year to 2017.”
Meanwhile, Voyageur’s economics “appear challenged in light of the projected ramp up in tight oil production in the North American market.”
The Bakken formation that stretches through parts of North Dakota, Montana and Saskatchewan, for instance, has been an important new source of supply for the North American marketplace. That oil is of better quality than the tarry bitumen produced in the oilsands, and therefore commands a better price.
“Clearly the volumes of tight oil that are being produced are impressive,” Williams said.
There’s room for both tight oil and oilsands crude in the North American market, he said, but it does put upgrading—converting oilsands crude into a lighter type that refineries can more easily handle—”under more stress.”
“They’re margin projects that only work because of the difference between the value between light and heavy materials, which we think get squeezed in a world with more tight oil,” he said.
“So we’re fully aware of it and we’ve factored it into our investment plans.”
Fort Hills, Joslyn and Voyageur are being weighed on their individual merits, and could theoretically be scrapped if they’re not found to be economically viable.
Williams says the focus will be on profitability and quality rather than on meeting stringent timelines. It’s a view many in the oilsands have been adopting in recent years to avoid the major cost overruns the sector experienced before the recession caused expansions to come to a screeching halt.
In releasing its results late Wednesday, Suncor said it now expects to spend $6.65 billion this year, down from the $7.5 billion it predicted earlier.
Suncor owes the lower spending to its new Firebag Stage 4 oilsands project, which came in 10 per cent under budget, as well as slowing the pace of the Total joint-venture developments.