Suncor Energy powers through pipeline crisis
Company ramping output at Fort Hills but won’t sanction new projects
CALGARY Suncor Energy Inc. is ramping up oil production even as pipeline bottlenecks have caused a handful of its competitors to slow their output, but it also warns that the company is reluctant to sanction new projects due to Canada’s uncertain regulatory environment.
Canada’s largest integrated oil company announced Wednesday it’s Fort Hills oilsands mine is now producing at a rate of 150,000 barrels per day and the project’s third and final extraction train will be online this month, allowing Suncor to reach full 190,000 bpd capacity earlier than expected.
Steve Williams, president and CEO, said the company is on pace to ramp up production another 10 per cent next year and that the company has enough pipeline space secured to move all of its barrels, including the new barrels from Fort Hills.
Other oilsands producers, including Cenovus Energy Inc., throttled back oilsands production in the first quarter of the year amid pipeline bottlenecks and the resulting big discounts for Canadian heavy oil barrels.
Williams said that Suncor’s access to pipelines and connection to downstream refineries completely insulated it from the big discounts between Western Canada Select and West Texas Intermediate benchmarks.
However, bad weather did knock some of Suncor’s oilsands production off-line in the first quarter, when it fell five per cent to 689,400 bpd, from 725,100 bpd at the same time last year.
While Suncor is currently ramping up production at Fort Hills and its offshore Newfoundland project called Hebron, Williams reiterated previous comments that his com- pany wouldn’t sanction new major projects in Canada until the country reduces regulatory red tape and uncertainty.
“The World Bank does a survey of how long it takes to get regulatory approvals through a system and Canada ranks 34th out of 35 in the developed world,” Williams said following his company’s annual meeting.
“We simply take too long and there’s too much uncertainty in the process.”
The World Bank’s latest Doing Business survey states it takes 249 days to get a construction permit in Canada compared to the OECD average of 154.6 days.
Williams said Prime Minister Justin Trudeau, who recently visited Suncor’s Fort Hills mine north of Fort McMurray, was aware of the problem and Suncor has communicated its concerns with politicians at other levels.
“Big investment in the resource industry — and I think it will be broader than that — is starting to move away from Canada and that’s partly because of taxation, partly to do with royalties and partly to do with the uncertainty and length of time it takes to get through these regulatory hurdles,” Williams said.
Williams echoed the concerns of Imperial Oil Ltd. CEO Rich Kruger, who said last week that his company had waited for four years for approvals on a pair of new oilsands projects and that Canada had become an uncompetitive place to spend money and grow production.
In the short term, however, Suncor is ramping up production and trying to wring more oil out of its recently completed projects.
Along with the lower production, Suncor reported net earnings of $789 million in the first quarter of the year, which is a 42 per cent drop from the same period a year earlier when it earned $1.3 billion.
Raymond James analyst Chris Cox said that despite the lower production, Suncor “still delivered solid financial results” as a result of its refining operations.
“We believe the strength in the refining operations will continue ... for 2018, likely presenting noticeable upside to Street expectations, and further buoying an already robust cash flow outlook,” he said in a note.
Suncor shares rose slightly Wednesday, increasing six cents to $48.90 each.
Cox has a target price on the stock of $60 per share.
Big investment in the resource industry — and I think it will be broader than that — is starting to move away from Canada.