Suncor faces risk on rising costs with $12.9 billion oil venture
BY JEREMY VAN LOON & REBECCA PENTY
CALGARY (Bloomberg) -- Suncor Energy and partners Total and Teck Resources face rising costs and shipping risks with their Fort Hills oil sands project, the first mining operation to get a green light in two years.
The $12.9 billion Fort Hills venture in northern Alberta, 40 % owned by Suncor with the remainder divided between Teck and Total, will produce 180,000 bpd within 12 months of startup in 2017, Suncor CEO Steve Williams said during a conference call.
To counter rising costs, Suncor has been boosting efficiencies at its operations and reviewing projects, including the Voyageur upgrader which the company canceled earlier this year. Imperial Oil in February boosted the cost of its Kearl oil sands mining site by 18 % as the company made changes to the design.
Even with the threat of higher costs, the oil sands provide a stable supply source for global energy companies that are also investing in United States shale formations, which become more expensive as development continues and production from wells decline, said Mike Tims, chairman of Peters & Co, a Calgary-based investment bank.
“Fort Hills reinforces their long-term view on oil prices despite the headwinds on costs,” he said.
Fort Hills, which had initially been slated to start in 2016, has 3.3 bBbbl of reserves and will produce oil for about 50 years, Suncor said.
Williams is “very confident” the project will be built on budget, he said during the call.