Suncor Energy's CEO says the company is still determining how a potential new Alberta-B.C. pipeline will affect its plans.Jeff McIntosh/The Canadian Press
Suncor Energy Inc. SU-T won’t immediately change its approach to capital spending and expansions after it and the rest of Canada’s five largest oil sands producers signed a non-binding agreement with Ottawa and Alberta, chief executive Rich Kruger says.
The deal, signed on July 2, set the stage for a substantial increase in crude production and pushed forward a massive carbon-capture project in Alberta’s north, clearing a hurdle to the construction of a new West Coast oil pipeline.
Mr. Kruger said Suncor is still determining how this memorandum of understanding may affect the company’s plans, adding it will remain “very thoughtful on long-term commitments and capital allocation.”
He didn’t rule out the possibility of increasing production if it presents value to the company and shareholders, but said the Calgary-based company’s “position today isn’t materially different than it would have been six months ago.”
The final government policy details and commitments from oil companies stemming from the MOU are due Nov. 15.
Mr. Kruger said while there is still “a lot of work to do to turn this non-binding set of ambitions into definitive agreements,” he was encouraged that the deal has created a “very different mood and tenor today than it has been in the past.”
Alberta, Ottawa and top oil producers agree to advance the Pathways carbon capture project
The Alberta government has proposed a new pipeline to carry one million barrels of oil a day to the West Coast, running along or close to the existing Trans Mountain pipeline corridor. It will be planned and built by the federally owned Trans Mountain Corp. and the province’s Alberta Petroleum Marketing Commission, working with Pembina Pipeline Corp. PPL-T
Who would fill the conduit remains uncertain. Various other pipeline expansions are already planned or in the works that together would carry an extra one million barrels of oil each day from Alberta to the West Coast or the United States.
These include a US$1.4-billion project by Enbridge Inc. ENB-T to increase its Mainline network and its Flanagan South Pipeline by roughly 250,000 barrels a day, and a series of optimization projects by Trans Mountain Corp. to boost the system’s capacity by roughly 34 per cent, or 300,000 barrels a day. South Bow Corp. SOBO-T has also solicited binding commitments for long-term volumes on its proposed Prairie Connector pipeline, which would carry 550,000 barrels a day from Hardisty, Alta., to multiple U.S. delivery points.
Yet oil sands companies have so far shown little appetite for massive capital investments to boost production, preferring instead to maximize barrels through more effective processes and, in some cases, looking to expand operations on existing footprints.
That’s not to say oil sands production is stagnant, as various companies have reported record volumes of late. Suncor itself is aiming to boost oil production by 100,000 barrels a day to reach nearly one million by 2028.
But instead of spending, oil sands players have been focused on funnelling profits back to their shareholders and shoring up their books. In Suncor’s case, it cut its net debt down to $4.5-billion in the second quarter, from $7.7-billion a year ago.
Suncor aims to boost production, increase cash flow with new three-year goals
On Tuesday evening, the company reported that it had beat second-quarter profit estimates, despite the torrential rains that hammered oil sands mines around Fort McMurray, Alta., in that time frame.
Mr. Kruger evoked the story of Noah’s Ark from the Book of Genesis to illustrate the extremely soppy conditions in the region.
“In Noah’s Ark, the torrential rains stop after 40 days and 40 nights. In Fort Mac, record rain and snowmelt continued throughout the quarter, with total precipitation the highest in more than 30 years, 50 per cent higher than the 10-year average,” he said.
The rain “materially affected mining productivity and quarterly production” to the tune of roughly 50,000 to 60,000 barrels a day, he said.
Mr. Kruger said Suncor used the extreme event to rejig some of its mining practices, including implementing new weather outlooks, pre-emptively securing critical minerals and equipment such as gravel and graders, and using drones to monitor mine conditions in real time.
Suncor reported net earnings of $3.7-billion – or $3.17 a common share – from April to June, compared with $1.1-billion, or 93 cents, in the same quarter last year. Adjusted operating earnings were $3.8-billion, up from $873-million the previous year.
The company reported several record second-quarter results, including refining and product sales, as it pushed more product into global markets. It has built up this strategy over the past few years, and it has paid off as the war in Iran continues to roil oil and gas shipments around the world.
The second quarter was the eighth in a row where Suncor’s product sales exceeded 600,000 barrels a day. Jet fuel sales were particularly strong at 51,000 barrels a day – 90 per cent higher than the company’s previous record of 27,000 barrels a day.