Suncor coy on upgrader

Suncor Energy is keeping its cards close to its chest on if or when it will restart plans for a 200,000 barrel per day Voyageur upgrader in Alberta once its takeover of Petro-Canada is closed on Aug. 1.

For now the oil sands giant is happier selling unprocessed bitumen to U.S. refiners, regardless of the Alberta government goal to keep more upgrading within the province.

Chief Executive Officer Rick George indicated the C$22 billion Voyageur scheme has been relegated on the priority list behind Suncor’s preference to “go long” on bitumen, sending production to the U.S.

He is counting on continued declines in Mexican production and “big declines” in Venezuela shipments to the U.S. Gulf Coast, along with a “very good pull” from U.S. refineries for Canadian heavy crude to help shape Suncor’s strategy for the next five years.

“There is no need to build an upgrader if you don’t have the bitumen to fill it,” he told analysts.

Both Suncor and Petro-Canada have put the brakes on major upgrading projects over the past year.

Without making any firm declarations until Petro-Canada is absorbed into Suncor, George hinted that priority will likely go to the third and fourth stages of the planned six-stage Firebag in-situ operation, which is designed to boost Suncor production by 200,000 bpd to 550,000 bpd.

Firebag is “high on the list and may roll out sooner” than decisions on the Voyageur, Petro-Canada’s Fort Hills mine and upgrader and Petro-Canada’s MacKay River in-situ project, he said.

Chris Feltin, an analyst with Tristone Capital, said he expects the next two phases of Firebag will be first in the line-up because there is “no imminent need to bring (Voyageur) off the shelf.”

What is working in favor of resuming upgraders is evidence that capital costs of steel and other materials in Alberta are down 10-15 percent from last year’s peak, but George does not expect to see a return to costs of a decade ago “unless there is a very protracted recession.”

He said the industry is also noticing better productivity, and is counting on the industry to show more discipline through the next expansion cycle, although there is no sign yet of wage rollbacks.

—Gary Park