Suncor Gets Set to Double Output, Hints at US$65 Oil Ahead
Canada’s largest tar sands/oil sands producer has requested regulatory approval for a third “bite-size” expansion, part of Suncor CEO Steve Williams’ plan to roughly double his company’s output of synthetic crude by adding 360,000 barrels per day from multiple new in-situ production sites.
Suncor received approval in March for two 40,000-barrel-per-day production sites south of Fort McMurray, JWN Energy reports. Earlier this month, it filed for approval for a third location. Drilling injection and recovery wells and installing production facilities will come at a cost of about $2 billion for each site.
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It may not be the “100-year” future that Williams foresaw for the tar sands/oil sands during a much-quoted speech in September, but it does represent another step in his strategy to make sure Suncor—distantly descended from the bitumen industry’s pioneers—remains the biggest fish in what may be a doomed [not to say heavily polluted] asset pool.
Last year, the company seized majority control of the crown jewel of the legacy industry’s industrial assets, the Syncrude facility north of Fort McMurray that steams heavy crude oil from tarry bitumen.
The latest application signals that Suncor is preparing to maximize its profit from an expected upturn in oil prices through the decade ahead—even though that bump isn’t expected to last.
As long as benchmark West Texas Intermediate (WTI) crude is selling in its current price range of US$50 to $55 a barrel, Williams told his audience last month, Suncor would limit its capital investment to “debottlenecking and pre-engineering”.
The request to develop a third in-situ site in its Meadow Creek cluster suggests the company is getting closer to moving beyond such low-risk investments to roll out the first iteration of an announced strategy to expand its output by “replication”. The idea is that the first facility to be built will become a template to be cheaply replicated in other locations, reducing the industry’s notoriously high production costs.
Williams said Suncor has as many as 10 potential sites selected for such cloned facilities, and expects them to begin producing their first oil by 2022. But Suncor would only “advance that development on replication,” Williams said in September, “at $65 WTI.”
He appears to think that day may be coming.