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Suncor reins in shale gas portfolio CEO has said company will ‘review and refine’ portfolio to ensure growth, returns; natural gas development said to be about timing Gary Park For Petroleum News
Oil sands giant Suncor Energy is continuing on its relentless march to capital discipline and aligning its assets with strategic objectives by shelving plans to develop shale gas properties in British Columbia.
The move means Suncor has effectively counted out supplying feedstock for LNG exports as a cash generator for the assets.
Early stage delineation work in the massive Montney formation, which straddles the British Columbia and Alberta border, has been dropped from the company’s agenda after it tested the potential for partnerships, causing further head scratching among other major E&P companies which are grappling with the impact of rising costs on their profit margins.
The Montney in British Columbia has an estimated 271 trillion cubic feet of gas resources and has been touted as the leading supply source for any LNG exports.
More timing than quality A Suncor spokeswoman said the company’s decision is more about the timing of development than the quality of the resource.
Further development of the play will be postponed, pending a “change in market supply and demand fundamentals,” she said.
Suncor first signaled its concern about gas prospects nine months ago when it struck a C$1 billion deal with the United Kingdom’s Centrica and state-owned Qatar Petroleum International to unload a bundle of assets producing 42,000 barrels of oil equivalent per day, including 978 billion cubic feet equivalent of conventional gas operations in northeastern British Columbia.
The bulk of Suncor’s gas production has been used to generate steam for its thermal recovery oil sands operations, but those volumes have been drastically scaled back to a daily average of 290 million cubic feet from 574 million cubic feet in 2010.
Portfolio review Chief Executive Officer Steve Williams has quietly made the point in recent times that Suncor’s goal is to “continuously review and refine” its portfolio to ensure they are delivering profitable growth and strong returns for shareholders.
He said last year that Suncor was well positioned to be an LNG player, but he cautioned that no detailed plans had been developed and that his company would not be stampeded into joining the rush.
Williams said Suncor has 176,228 acres of Montney lands which might hold 8 trillion cubic feet of resources.
The company has made no secret that its future is staked heavily on producing and marketing less-processed oil sands bitumen, underscored by its partnership decision with Total’s Canadian unit and Teck Resources to move ahead with the C$13.5 billion, 180,000 barrels per day Fort Hills project, scheduling first production in 2017.
Suncor said it would stage construction of Fort Hills and assemble some components offshore to curb capital spending.
It plans to spend C$7.8 billion this year, with about C$4.2 billion earmarked for growth projects, including C$1.9 billion to advance oil sands projects.
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