Suncor rethinks two major projects

Bakken dims Voyageur prospects; Fort Hills delayed by one year

Suncor Energy is reviewing the restart of its half-built Voyageur upgrader near Fort McMurray and pushing the Fort Hills mine project back by about a year as a rising tide of light oil production threatens the profitability of the projects.

Canada’s top integrated oil producer and refiner backed away from what had been a $20.6-billion plan to boost production from its oilsands operations while it works to squeeze costs from the project.

Steve Williams, who stepped in as chief executive in May following the retirement of founding CEO Rick George, had warned that Suncor would focus on profits rather than growth.

On Thursday, Williams put that plan into action, pushing back the startup of the Fort Hills oilsands mine by one year, to 2017, as Suncor and partners Total SA and Teck Resources Ltd. look for ways to boost the profitability of the multibillion dollar project.

“We haven’t completed the review, but … we have been able to add significant value to the mining projects,” Williams said on a conference call.

“However, the production timeline for Fort Hills is likely to be delayed by about a year.”

Williams also moved to hold off on construction of what was to be the centrepiece of the company’s growth plans, the 200,000 barrel per day Voyageur upgrader which was put in “safe-mode” in 2008 when oil prices crashed, and had originally been scheduled to open in 2016 to convert bitumen from the Fort Hills mine into refinery-ready synthetic crude oil.

“Voyageur economics appear challenged in light of the projected ramp-up in tight oil production in the North American market,” he said.

There’s room for both tight oil and oilsands crude in the North American market, Williams said, but it does put upgrading — converting oilsands crude into a lighter product that refineries can more easily handle — “under more stress.”

“They’re margin projects that only work because of the difference between the value of light and heavy materials, which we think get squeezed in a world with more tight oil,” he said.

The company has already built and is operating the Guadalajara and Tamazunchale pipelines and will soon break ground on a Tamazunchale pipeline extension.

TransCanada operates a network of natural gas pipelines that extends more than 68,500 kilometres and taps into virtually all major gas supply basins in North America.

It is also developing one of North America’s largest oildelivery systems.

The company began work this summer on a $2.3billion-US crude pipeline connecting an oil storage hub at Cushing, Okla., to Texas refineries.

It’s expected to start up in mid to late 2013.

The Gulf Coast pipeline was initially part of TransCanada’s $7.6-billion Keystone XL proposal, which would have sent Alberta crude to the Gulf via six U.S. states but has been held up by political and environmental wrangling in the United States.