“While we’ve seen some improvement in crude oil prices and the overall economy, we believe that a conservative capital strategy remains the best approach for Suncor Energy,” said Rick George, president and chief executive officer. “We’re looking at a level of capital investment that is supportable entirely from free cash flow at mid-cycle crude oil prices.”
The majority of growth spending will be directed toward the Firebag Stage 3 in-situ oil sands expansion, which was approximately 50% complete before being deferred in early 2009. Suncor Energy now expects the project to begin production in the second quarter of 2011, with volumes then beginning to ramp up toward design capacity of approximately 68,000 barrels per day (bpd) of bitumen. Spending will also be directed to Firebag Stage 4 to support a target of first bitumen production in the fourth quarter of 2012. Stage 4 also has a design capacity of 68,000 bpd.
“We’ve said that sequencing of our growth projects would be based on highest expected return on capital, near-term cash flow and lowest risk,” said George. “Expansion work at Firebag clearly fits all the criteria to be first out of the gate.”
Growth capital will also be directed toward completing the Millennium Naphtha Unit, which is planned to add value to Suncor Energy’s product slate, and to expansion of Suncor Energy’s St. Clair Ethanol Plant. International and East Coast Canada growth capital plans include commitments in Libya and investments planned to bring the Ebla gas field in Syria into production in the second quarter of 2010.
Sustaining capital in the upstream portion of the business for 2010 includes investments in Suncor Energy’s planned Tailings Reduction Operations and maintenance plans at Oil Sands, Natural Gas and International and Offshore facilities. In downstream operations, spending is primarily focused on investments to improve environmental performance and planned maintenance work.
“Suncor Energy’s overall spending profile is consistent with the key priorities we’ve outlined: staged capital growth, cost reduction and continuous improvement of environmental performance,” said George.
Capital plans and sequencing for other projects in Suncor Energy’s growth portfolio are under evaluation with a further update expected in the fourth quarter of 2010.
Suncor Energy’s 2010 and ongoing spending plans reflect expected synergies resulting from its merger with Petro-Canada in August. Operating synergies, which had been initially projected at $300 million per year are now expected to exceed that target. Approximately $400 million in annualized synergies related to work force rationalization, product marketing, and supply chain optimization have been identified and are expected to be realized by the end of 2009. Suncor Energy expects that further operating synergies will be identified as integration work continues in 2010.
