Friends of the Lubicon
PO Box 444 Stn D,
Etobicoke ON M9A 4X4
Tel: (416) 763-7500
Email: fol (at) tao (dot) ca
www.lubicon.ca
February 2, 2008
On Monday, January 28, 2008 Suncor Energy submitted a "Statement of its intent to Participate" in the hearing of TransCanada's application to the Alberta Utilities Commission to build a huge new 42 inch diameter gas pipeline through the heart of unceded Lubicon Territory over Lubicon objections. Suncor predictably wants the application approved.
Suncor's "Statement of its intent to Participate" reads, in part:
"Suncor is a large producer, marketer and consumer of natural gas transported within Alberta. As such, the outcome of this Application will affect Suncor's business.
"Of particular importance to Suncor is a secure and reliable supply of natural gas for the oil sands facilities in North-eastern Alberta. In addition to a curtailment of bitumen (tar sands) and upgraded products (the oil wrung from the tar sands), disruptions to the supply of natural gas to Suncor's facilities could cause major safety and operations issues -- and potentially severe physical damages."
One has to admit that sounds pretty serious. If the Utilities Commission doesn't approve the TransCanada application and Suncor doesn't get the natural gas TransCanada is proposing to transport from northwestern Alberta through Lubicon Territory to Suncor's tar sands operation in northeastern Alberta, Suncor production would be curtailed, there could be "major safety and operations issues" and there could be "potentially severe physical damages".
A couple of days later -- on Wednesday, January 30th -- Suncor announced that it is "pushing ahead with its $20.6 billion dollar Voyageur oilsands expansion...which will add 200,000 barrels per day (and) take Suncor's oilsands production past 550,000 barrels per day by 2012, making (Suncor) the largest oilsands producer in Canada, and, indeed, the world".
It takes about 750 cubic feet of natural gas and 4-5 barrels of water to wring one barrel of oil out of two tons of gooey tar sands. That's already more natural gas and water than can be sanely sustained even to support current production. Suncor's proposed expansion will require an additional 150,000,000 cubic feet of natural gas a day -- and 1,000,000 more barrels of water a day -- over and above the amount they are currently using.
Suncor is therefore not being threatened by somebody cutting off the natural gas they need to operate causing safety and operational issues, severe physical damages and curtailment of production. Suncor is in effect threatening to create these kind of problems with their ill-conceived plans if they are not provided with all of the natural gas and water they need to support their lucrative but environmentally disastrous operations.
Adding insult to injury there are clearly discernable plans to move as quickly as public resistance can be overcome to replace commercially valuable and finite natural gas with potentially lethal nuclear power as an inexhaustible source of energy to wring the oil out of the tar sands. These plans include a cynical campaign to encourage people to refer to highly toxic nuclear waste as "spent fuel to be stored until technology figures out a way it can be reused". (Earlier they conducted a campaign to get people to use the term "oil sands" instead of "tar sands" because they thought "oil sands" sounded "cleaner". )
Instead of plunging pell-mell into the abyss and potentially dragging the entire planet in after them, the companies pressing for approval of the TransCanada pipeline across unceded Lubicon land over the objections of the Lubicon people need to slow down and think a little bit about how it might be possible to exploit the tar sands without running roughshod over the Lubicons and destroying the environment on which we all depend for survival.
The contradiction between the position taken in Suncor's "Statement of intent to Participate" and Suncor's publicly announced expansion plans should be pointed out to the Provincially appointed members of the Alberta Utilities Commission.
A couple of newspaper articles reporting on Suncor's expansion plans are included below.
* * * * * * * * *
Shaun Polczer
Calgary Herald
Thursday, January 31, 2008
CALGARY - A day after reaching an agreement with the province on royalties, Suncor Energy Inc. on Wednesday pushed ahead with its $20.6-billion Voyageur oilsands expansion.
At peak construction in 2009 to 2010, the expansion is expected to employ 7,800 people. On completion, the expansion is expected to create 800 permanent jobs.
The project, which will add 200,000 barrels per day (bpd), will take Suncor's oilsands production past 550,000 bpd by 2012, making it the largest oilsands producer in Canada, and, indeed, the world.
On Wednesday company president and CEO Rick George said Tuesday's royalty deal was the catalyst to formally sanction the massive undertaking.
"Was it a factor? Absolutely," he said. "It's fair to both sides and enabled us to move forward overall.
"We do want to be the developer of choice and we do also want to be the developer that's here for the 50- to 100-year-run, not just the short term."
Voyageur becomes the latest in a backlog of more than $100 billion worth of oilsands projects on the books slated for the Fort McMurray area.
Suncor joins Shell and Canadian Natural Resources Ltd. among operators that have committed to building multi-billion dollar expansions to extract oil from the gooey sands and send it to U.S. refiners.
More than half of the project's estimated budget -- about $11.6 billion -- is earmarked for the construction of a third upgrader that will convert 245,000 bpd of bitumen into 200,000 bpd of synthetic crude oil.
Another $9 billion will go to expanding the company's Firebag in-situ project, which will be built in four subsequent phases. At its peak, the project will see 7,800 workers onsite.
Voyageur has been in the works since 2003 but was put on hold while Suncor reviewed costs that were pegged at $10 billion as recently as 2005.
George estimated that some $2.5 billion has been spent to date on front-end engineering and project scope work. "We only have $18 billion to go," he quipped.
George said Suncor took pains to reduce environmental impacts such as water use and said the door is open for applying new technologies such as coke gasification to minimize the use of natural gas to make oil.
Suncor said the project would generate a 15-per-cent return on capital at oil prices of $60 US a barrel, although UBS analyst Andrew Potter estimated an after-tax gain of 12 per cent at oil prices of $70 -- a rate he termed "reasonable."
Oil prices rose 69 cents in New York on Wednesday, to close at $92.33.
"(It's) a return that is competitive with full cycle global oil exploration," he noted.
Along with the Voyageur expansion, Suncor announced a $7.5-billion capital budget for 2008, including $6 billion earmarked for oilsands.
"We continue to believe that Suncor represents a best-in-class story from an execution and growth standpoint," said Raymond James analyst Justin Bouchard.
Suncor's shares jumped nearly three per cent on a down day for the Toronto Stock Exchange, gaining $2.40 to close at $93.50.
spolczer@theherald.canwest.com
Voyageur Pushes Ahead
Overview of Suncor's $20.6-billion Voyageur Project:
- Bitumen supply -- About $9 billion is to be spent to construct four stages of in-situ production, with each stage expected to produce an average of about 68,000 barrels per day (bpd) of bitumen.
- Upgrading -- About $11.6 billion will go toward construction of an upgrader designed to process 245,000 bpd of bitumen into 200,000 bpd of crude oil. The product slate is expected to consist of approximately 85 per cent sweet crude oil and diesel, and 15 per cent sour crude oil.
- The cost estimates include investments in infrastructure including pipelines, camps, administration facilities, cogeneration, tank farms and an interchange on Highway 63 to enable safe traffic flow.
© The Edmonton Journal 2008
Norval Scott
The Globe and Mail
January 31, 2008
CALGARY -- Bowing to the massive increase in oil sands project costs, Suncor Energy Inc. said yesterday it will ratchet up its Voyageur investment to more than $20-billion.
The figure is a dramatic increase from the tentative estimates Suncor made in 2005, when a company executive said that the Voyageur oil sands project would likely cost somewhere over $10-billion. Suncor's move, which comes as companies are weighing the impact of Alberta's new royalty regime, is a vote of confidence in the oil sands.
The company feels "comfortable" with the new figure and "really good" about announcing the project at this time, said chief executive Rick George.
"This latest investment marks an exciting new chapter for our company," he said. While Suncor still has "a long way to go in terms of engineering" on Voyageur, the firm has "some degree of assurance on what the costs ... are," he said. The project is by far the largest to be sanctioned by an oil sands firm since last October, when Alberta increased the royalties that oil producers will have to pay starting in 2009. It will add 200,000 barrels of oil a day to Suncor's production, enabling it to hit its long-term target of producing 550,000 barrels of oil a day by 2012.
While most observers believe the new royalty structure shouldn't prevent development of the oil sands, little in the way of new activity has been seen in the sector since the changes were announced. Decisions on some projects, such as Petro-Canada's Fort Mackay development, have been delayed as companies appraise the impact of the royalty changes.
However, Suncor hasn't been deterred by the uncertainty or by the dramatic rise in costs seen over the last three years in the oil patch. The company, which has already spent $2.5-billion on Voyageur, will spend a total of $20.6-billion on the project - a gargantuan figure, but one that's not out of line with the amount expected to be spent on integrated projects being developed by other firms.
Voyageur will include an upgrader capable of processing 245,000 barrels a day of bitumen, which will cost $11.6-billion to build. The bitumen itself will come from a $9-billion, four-stage expansion of the company's Firebag extraction facility near Fort McMurray.
"It doesn't surprise me that the economics still work, as the royalties that were announced for the oil sands weren't as bad as people feared," said Randy Ollenberger, a Calgary-based analyst with BMO Nesbitt Burns Inc. "But this should offer some reassurance that the economics [for the oil sands] are still there."
The Voyageur project also marks a shift for Suncor in that Firebag's bitumen will be produced by steam-assisted gravity drainage (SAGD). where steam is pumped into an underground oil reservoir to create mobility and allow the bitumen to be extracted. While Suncor already runs some SAGD operations, the company has a long history of mining the oil sands with trucks and shovels - building its first mine in 1967 - and mining had been expected to play a larger part in Voyageur.
"The expansion is more weighted to [SAGD] than we had assumed," said Andrew Potter, a Calgary-based analyst with UBS Securities Canada Inc. While Voyageur would likely have higher operating costs than previously expected as a result, UBS had assumed that the project would cost $23-billion to build, so Suncor's lower cost estimate should be viewed as "a slight positive," Mr. Potter added.
Using SAGD instead of open-pit mining will reduce the expansion's environmental impact, said Mr. George. He added Suncor's experience in the oil sands means it will overcome the high cost and labour shortage problems that have plagued other major developments in the region.
"We're the largest investor in the business and we're not a newcomer to this - we've got more experience than anyone," he said. "This is our major business, we are a large player, we have the balance sheet ready to go and we have the organizational capacity and the experience to go with this. All of those factors lead us to believe we have a better chance of success than some of the other competitors."
The sanctioning of Voyageur comes a day after Suncor announced a new deal with the Alberta government that will see it pay more royalties on its existing oil sands operations. However, the announcements are unrelated as new projects, such as Voyageur, come under the royalty framework set out by the government in October, rather than under the pre-existing agreements, said Suncor spokesman Brad Bellows.
fol-request at masses.tao.ca