Suncor's 2010 Capital Spending "Restarts The Growth of Oil Sands"

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Researched by Industrial Info Resources (Sugar Land, Texas)--On Friday, November 13, Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta) announced capital spending plans for 2010. The company plans to invest approximately US$5.24 billion, with $1.43 billion going to growth projects and the remainder going toward sustaining existing operations. The growth projects include the restart of construction on stages 3 and 4 of the company's Firebag bitumen production facility, leading Suncor President and CEO Rick George to say in a conference call, "This officially restarts the growth of oil sands."

Although both stages of the Firebag project were placed on hold earlier this year for economic reasons, George spoke of the growth potential of oil sands in the coming years. "I see actually no reason that we cannot grow the oil sands production at a rate of around 10-12% on average per year through 2020," he said.

However, other delayed projects, such as Suncor's $1.64 billion Voyageur upgrader expansion will remain on hold. "Near-term, the differentials do not support our Voyageur upgrader, so our plan here is to be bitumen-long. But I do see the Voyageur upgrader as being a great opportunity for us down the road at some point. For 2010, my goal is to exit the year at the production rate of 350,000 barrels per day from oil sands. What I will say about our other projects is that we are evaluating them, sequencing them, and expect to announce by the fourth quarter of 2010 what will come after Firebag 4."

The company's spending on existing operations will include approximately $429 million for tailings reduction operations (TRO). Early last week, Suncor announced that it had awarded the EPCM contract for the TRO project to Jacobs Engineering Group Incorporated (NYSE:JEC) (Pasadena, California). For additional information, see November 13, 2009, article - Suncor Awards EPCM Contract to Jacobs Engineering for Canadian Oil Sands Project.

George added that while the company currently generates approximately 50% of its cashflow from oil sands projects, he expects this number to rise to 65% after various divestitures and the completion of Firebag 3 and 4.

All figures are presented in U.S. dollars based on the current exchange rate of CAD$1=US$0.9536.

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