Suncor taking over day-to-day operations at Syncrude to cut $300M in costs

• Shares of Suncor Energy Inc. jumped Tuesday a day after the energy producer announced it will take over the day- today operations of the Syncrude oilsands mining joint venture next year in a move expected to cut costs by $300 million.

Despite owning a 58.75- per- cent majority in Syncrude — one of the first oilsands mining and upgrading joint- ventures in Canada — Suncor has until now kept in place an operating structure that sees competitor Imperial Oil Ltd., which owns 25 per cent of the project, appoint presidents to oversee it.

Now, Calgary- based Suncor will take over and begin operating the mine and connected 350,000- barrels- perday upgrader as it operates its other oilsands projects, including Fort Hills, its Base Plant and its steam- based oilsands projects. The move is expected to save $ 300 million per year and reduce Syncrude’s operating costs to US$23 per barrel.

“This presents a significant strategic opportunity for Syncrude and the joint- venture owners,” Suncor president and CEO Mark Little said in a release Monday.

Suncor shares added more than six per cent on Tuesday before slipping back. They closed at $ 22.99, up 4.9 per cent in Toronto.

Like the rest of the oilpatch the company has been hurt by falling oil demand due to the COVID-19 impact on the economy.

In an interview Little said Syncrude has its own management team, accounting department and other overlapping roles as it operates as a standalone business. “Syncrude today has to some degree a duplicate management structure to us. It’s getting so convoluted,” he said, adding that all of the owners of the joint- venture agreed that Suncor should remove some of the duplication. “There will be some downsizing associated with that.”

Little said Suncor is still working through detailed plans and couldn’t disclose how many jobs would be affected.

In October, Suncor announced it was undertaking a cost- cutting initiative that would reduce its workforce by 15 per cent, which translates to as many as 2,000 job cuts.

Suncor has been steadily building up a larger stake in the Syncrude oilsands plant with a string of deals in the last four years, including a hostile- turned- friendly $ 6.6- billion deal for Canadian Oil Sands Ltd. in 2016 and a $ 920 million for Mocal Energy’s five-per-cent stake in the joint venture in 2018.