Petro-Canada sticks with Syncrude; Nexen could bail

Gary Park

Petroleum News Calgary Correspondent

Syncrude Canada got one solid vote of confidence from a partner in its giant oil sands consortium as it adjusts to a C$2.1 billion cost overrun and a 12-month delay in completing an expansion.

Petro-Canada Chief Executive Officer Ron Brenneman said his company will keep its 12 percent stake in the operation and pay its C$250 million share of the overrun.

“Syncrude is very much a core asset,” he told reporters in Calgary on April 27 after the company’s annual meeting.

“The fundamentals of Syncrude as a going concern and as an asset really haven’t changed.

“It’s a long-life asset, which we particularly like in our portfolio. It has an expansion potential even beyond the project that we currently have under way and it has a very capable management and operating team,” he said.

Brenneman said he is confident the consortium will “overcome difficulties that we’ve seen over the last couple of years.”

Hit by the largest overrun in the history of the Alberta oil sands, Syncrude is now facing a bill of C$7.8 billion to finish a 100,000 barrel per day addition by mid-2006, raising its output to 350,000 bpd of synthetic crude.

Trust open to buying out smaller partners

The consortium is made up of the trust, Imperial Oil 25 percent and Petro-Canada 12 percent, with ConocoPhillips, Nexen, Murphy Oil and Mocal Energy each holding less than 10 percent.

Nexen Chief Executive Officer Charlie Fischer told reporters in Calgary on May 4 that his company might sell its 7.23 percent interest to help finance further additions to its 50 percent share of the Long Lake oil sands joint venture with OPTI Canada.

Faced with a Long Lake price tag of C$1.7 billion, Fischer said an expansion from the initial 60,000 bpd to 160,000 bpd or more might be in the cards. “It seems to me that it makes sense to really look hard at whether we should monetize our Syncrude position at that point,” he said. Fischer said bluntly that Nexen is not happy with the Syncrude overruns, although the plant is a good source of revenue.