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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2006

Vol. 11, No. 23 Week of June 04, 2006

Oil Patch Insider

Syncrude Canada execs Ruigrok, Carter up front on a smelly issue

It wasn’t the sort of grand opening oil sands consortium Syncrude Canada had in mind for the launch of an C$8.4 billion expansion.

The ribbon cutting on May 23 was relocated from the project site to avoid sending noxious, potentially hazardous waste gas up the nostrils of its honored guests.

But Syncrude took it on the chin, when others might have crawled underground.

The brass — Chief Executive Officer Charles Ruigrok and Chief Operating Officer Jim Carter — fronted up to a gathering of global media and admitted they didn’t know exactly how long it would take to remove the bad smells emanating from a unit installed to reduce sulfur dioxide emissions.

Ruigrok said the cost of solving the problem will not be material to Syncrude while Carter admitted production losses in the interim are about 80,000 barrels per day.

But the two executives are giving just as much attention to the longer-term goals for the operation.

They said the Stage 3 expansion will eventually increase output to 350,000 bpd from 250,000 bpd and debottlenecking will contribute another 30,000-50,000 bpd by 2012.

A Stage 4 expansion could push the world’s largest producer of synthetic crude to 500,000 bpd within a decade.

Taking its lumps is not new for Syncrude, which had the even greater embarrassment of a major fire the night before its gala launch in 1978.

Like everyone in the oil sands business it has hit plenty of potholes over the last 26 years with unscheduled shutdowns and cost overruns in the multi-billion-dollar range. It has also immeasurably advanced the expertise and technology needed to develop a 175 billion barrel resource.

Stage 3, part of a project called UE 1, ended up costing more than double the initial estimate of C$4 billion.

But its contribution during construction and beyond is good news for the consortium and governments.

During the construction peak the labor force was 6,500; at 350,000 bpd the value of daily production will be C$28 million; annual royalties starting this year will be C$660 million; UE 1 has tallied 43 million workforce hours.

Marcel Coutu, chief executive officer of Canadian Oil Sands Trust, the largest partner in Syncrude, said the consortium always anticipated that the massive Stage 3 expansion “might be a bumpy process” but that “does not detract from the long-term value” of the addition.

But he said the consortium is working around the clock with technology experts to find a solution that “alleviates the odor issues experienced by the local communities.”

—Gary Park






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