Suncor Awards Contract for 2010 Turnaround Project to KBR

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Researched by Industrial Info Resources (Sugar Land, Texas)--Engineering, construction and services company KBR Incorporated (NYSE:KBR) (Houston, Texas) has secured a contract from integrated energy company Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta) to provide services for the latter's 2010 turnaround project being implemented at Suncor's oil sands plant in Fort McMurray, Alberta.

Under the contract, KBR Canada (Calgary) will manage, plan and execute the shutdown and maintenance activities of the plant, including direct hire of the labor force, the management of subcontractors, and the coordination of activities between Suncor's workforce and other contractors hired during the turnaround. The KBR Canada team will be assisted in the execution of duties by subsidiary TurnAround Group Incorporated (TGI) (Houston, Texas). TGI will provide high-level technical expertise and expert project controls systems in the areas of cost estimation and forecast, planning and scheduling, change management, and the integration of the activities of KBR, Suncor and other companies. The commercial value of the contract has not been disclosed.

The oil sands business of Suncor recovers bitumen from oil sands, processing it into refinery-ready crude-oil products. Bitumen, water and sand are the constituents of oil sand. Before being processed, the mixture must be heated underground or mined. Suncor uses two methods to produce bitumen. In surface mining, the oil sands are extracted by digging. However, only about 20% of the oil sands can be procured by this method. Reclamation processes are begun as soon as mining is complete. Bitumen is separated from the oil sands by the addition of hot water. In the in-situ extraction process, bitumen is heated by steam injection and pumped to the surface.

The extracted bitumen is then heated, and excess carbon or petroleum coke is removed. The hydrocarbon vapors released by the coke drums are fractionated to obtain naphtha, kerosene and gas oil. A light sweet synthetic crude oil is the end product that is shipped by pipelines to North American refineries, where it is processed to obtain gasoline, jet fuels and other petroleum products.

Suncor is currently implementing plans to add Voyageur, the third upgrader, at the Fort McMurray facility. The expansion will enhance Suncor's crude-oil production capacity by 200,000 barrels per day (BBL/d) to reach a future target of 550,000 BBL/d. Although the expansion project received regulatory approval in 2008, construction of the upgrader has been put on hold because of Suncor's revised spending plan for 2009. The project is currently in "safe mode," and construction will be resumed as soon as the dates have been determined, which will largely be determined by market conditions.

Suncor averaged oil sands production of 228,000 BBL/d in 2008. The first quarter of 2009 saw the firm's oil sands production average reach 278,000 BBL/d. The company's target for the whole of 2009 is an average production of 300,000 BBL/d.

Suncor performed several planned and unplanned maintenance activities at extraction and upgrading facilities in 2007 and 2008, which resulted in production declines. Planned maintenance shutdowns or turnarounds are an essential part of the lifecycle of oil sands plants, refineries and natural-gas plants, ultimately helping facilities operate more safely and efficiently.

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