Odour problem fix will cost $200M, Suncor says
Firebag output to be expanded
Reuters; With files from Canwest News Service
CALGARY - Suncor Energy Inc. says clearing up odour problems at its Firebag thermal oilsands operations near Fort McMurray will cost about $200 million, but it hopes to complete the work later this year, allowing it to boost output at the site.
John Rogers, a spokesman for Suncor, said on a conference call Tuesday the company was working with Alberta government officials to cut emissions of hydrogen sulphide gas at its Firebag site. Production at the site was capped in October at about 42,000 barrels a day until the problem is fixed.
"We are working currently with the regulators to try to get the cap lifted," Rogers said.
Suncor said it has not had any excessive release of the gas since December. The gas smells like rotten eggs and is deadly in high concentrations.
The company plans to expand output at Firebag to 95,000 barrels of bitumen a day using thermal technology, where steam is pumped into the oilsands to liquefy the tar-like bitumen so it can flow to the surface.
Suncor also plans to shut down one upgrader in the second quarter for about 30 days of maintenance.
While the unit, known as upgrader 1, is down upgrader 2 "is expected to continue producing" about 200,000 barrels a day of oil, the company said. Upgraders convert bitumen extracted from oilsands into refinery ready crude oil, called synthetic crude.
The plant will be running at 350,000 barrels a day by the fourth quarter.
Suncor's fourth-quarter earnings more than doubled as oil prices climbed and lower tax rates prompted a big one-time gain, but the profit still ran shy of the firm's estimates.
Suncor said net profit rose to $963 million, or $2.08 a share, in the quarter through Dec. 31, compared with $358 million, or 78 cents a share, a year earlier.
The company benefited as oil prices surged in the quarter as global supplies tightened.
Suncor's average price for its output of synthetic crude and other products surged 36 per cent from the fourth quarter of 2006 to $82.36 a barrel.
Excluding a $360-million gain stemming from lower federal and provincial taxes and other items, Suncor said earnings were $598 million, or $1.29 a common share, for the quarter, up from $378 million, or 82 cents a share, a year earlier.
The earnings were shy of the $1.54 a share average profit estimate among analysts polled by Reuters Estimates.
"The variance is due ... to higher than forecast cash costs and ... lower than forecast downstream earnings," Andrew Potter, an analyst at UBS Securities, wrote in a note to clients.
Output from Suncor's oilsands operations fell 5.2 per cent from the year before to 252,500 barrels a day due to operational problems.
The company's natural gas production rose 10 per cent to 229 million cubic feet a day.
Suncor expects oilsands output this year to run between 275,000 and 300,000 barrels a day, less than some analysts had thought.
Chief Executive Rick George said Suncor will release soon a detailed cost estimate for its massive Voyageur project, which will boost production to 550,000 barrels by 2012. The company is looking to firm up its design and avoid the multibillion-dollar cost overruns which have plagued every major oilsands project.
"When we do give a cost estimate it will be one we have some faith in and can meet," George said on a conference call.
George said the company is continuing negotiations on a new royalty framework with the Alberta government. In October, Premier Ed Stelmach gave Suncor and Syncrude each 90 days to replace existing agreements that were to expire in 2016 as part of the government's new royalty framework. But George denied there are any hard and fast time lines to reaching a deal.
"That was the deadline the government gave, it was not a Suncor deadline," he said.
"We continue to have a great constructive dialogue and we hope to resolve it soon."
© The Edmonton Journal 2008
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