Suncor Energy Steps Up Oil Sands Upstream and Downstream Capital Spending

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta) has spent billions of dollars over the past several years to increase its oil sands production capacity up to the current 225,000 barrels per day, through its Millenium expansion (PEC 56000390) and now the recently completed first phase of the Firebag project (PEC 56000394). And there seems to be no end to the expansion plans in sight. A series of debottlenecks of existing extraction and upgrading plants along with the ambitious $5 billion Voyageur program (PEC 56000608) will see Suncor's production rising to 550,000 barrels per day by early next decade.

Suncor has made several key moves recently including an announcement to increase 2003 capital spending from $760 million up to over $1 billion. Most of this year's capital spending is tied into the now completed first phase of the Firebag expansion, as well as the completions of major shutdown maintenance work at the company's extraction and upgrading plants.

Long term, the company is defining project scope to debottleneck existing extraction area plants, including plant 82 ore processing and other Steep Bank facilities, as well as preparing for the ten-year Voyageur program with a goal of expanding up to 550,000 barrels per day.

Most recently, the company has received U.S. Federal Trade Commission approval to acquire ConocoPhillips' Denver Refinery (Plant 1015830), which employs close to 225 workers in Commerce City, Colorado. The refinery has a 57,500 barrel per day crude oil refining capacity. Also included in the $150 million purchase price is the 300 mile Rocky Mountain crude oil pipeline extending from the Denver refinery to Lance Creek, Wyoming. It also includes 68 percent ownership of the 87 mile Centennial pipeline system. These pipelines give Suncor crude oil transportation access via the Express Pipeline system, owned by Terasen Pipelines Incorporated a subsidiary of Terasen Incorporated (TSX:TER) (Vancouver, British Columbia). The Express Pipeline extends from the Hardisty, Alberta hub to Casper, Wyoming. Hardisty has become a major oil distribution hub for the Fort McMurray Athabasca oil sands region.

The ultimate goal for Suncor would be to transport up to 50,000 barrels per day of Suncor's crude bitumen to the U.S. refinery for processing and sale to U.S. markets. An additional $200 million will be spent on clean fuels emissions compliance and retrofitting the refinery to process Suncor's sour crude blends.

This will be Suncor's third petroleum refinery. Suncor operates two refineries (upgraders) in Canada, one at Fort McMurray, Alberta (Plant 1058437) and a 70,000 barrel per day refinery in Sarnia, Ontario (Plant 1016744).

The acquisition seems to be a wise move by Suncor to shore up reliable downstream avenues into the huge U.S. market for its growing crude oil capacity. It also satisfies the growing need for reliable crude oil supplies for the U.S. In 2002, Canada was the third largest crude oil supplier to the U.S. behind Saudi Arabia, and Mexico, supplying 1.4 million barrels per day or about 15.8 percent of U.S. imports.