Suncor Energy Inc. fire-damaged oil sands upgrader is expected to be back in service in April, and the downtime means production from Canada's biggest energy company will be squeezed for the next few months.
Two weeks ago Suncor said a fire broke out at its U1 upgrader, which processes heavy crude from its oil sands operations north of Fort McMurray, Alta., into a higher quality type of oil refineries can more easily handle.
Calgary-based Suncor said Monday it has finished assessing the damage and that repairs are currently under way. Production of synthetic crude oil is expected to start back up again in early April.
In addition, chief operating officer Steve Williams has launched an investigation to review process safety and reliability, which will include the help of third party experts.
Suncor said insurance will likely not play a significant role in mitigating losses from the incident. The company did not say how much the repairs are expected to cost.
A week before the fire, Suncor said production from its oil sands operations this year would average between 285,000 and 315,000 barrels per day. That doesn't include production from its 12 per cent stake in the Syncrude Canada Ltd. partnership.
Suncor now says it expects combined production of synthetic crude and bitumen will average 210,000 barrels per day in February and 230,000 barrels per day in March while the upgrader is fixed.
Suncor said it will provide an update on its 2010 production outlook on May 4, when the company is planning to release its first-quarter financial results.
The volume decrease isn't "overly material," said UBS Investment Research analyst Andrew Potter in a note to clients Monday.
"When the news first broke of the second fire, we had anticipated an update from the company some time last week. Because of the delay, the market was beginning to fear a larger fire impact," he wrote.
UBS is now expecting Suncor's annual production to be 280,000 barrels per day versus its previous estimate of 300,000 barrels per day.
The upgrader affected by the Feb. 9 fire is able to produce roughly 125,000 barrels per day.
A second, newer upgrader has a capacity of about 175,000 barrels a day. A fire shut down that unit in December and had just come back into service in early February. That one is expected to continue operating normally.
Suncor is Canada's biggest integrated energy company, whose operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand.