Syncrude Partner Imperial Sees Expansion Delayed Until After 2020
November 23 2011 - 5:28PM
Dow Jones News
An expansion of the Syncrude oil-sands joint venture will likely
be put on hold until after 2020, the project's operator Imperial
Oil Ltd. (IMO) said Wednesday.
"Imperial is of the view that expansion would not happen before
the end of this decade," Imperial Oil spokesman Pius Rolheiser
said.
Syncrude's largest owner with a 36.7% stake, Canadian Oil Sands
Ltd. (COS.T), has been promoting a plan since early last year to
expand the Syncrude project's crude oil production capacity from
350,000 barrels a day to about 550,000 barrels by 2020.
But the reluctance of Imperial Oil, which owns a 25% stake and
manages the project, would effectively nix those plans, as any
expansion requires approval of all the partners.
Imperial Oil made its comments on the Syncrude project Wednesday
after FirstEnergy Capital analyst Mike Dunn wrote in a research
note that he believed support for the expansion plans had waned
among Syncrude's other large partners, including Imperial Oil,
which is 70% owned by Exxon Mobil Corp. (XOM), and Suncor Energy
Inc. (SU). Dunn suggested that Imperial Oil and Suncor would be
more focused on building their own oil-sands projects - Imperial's
Kearl project and Suncor's Fort Hills and Joslyn project - for the
rest of this decade, rather than on expanding Syncrude.
Imperial's Rolheiser said that Imperial remains committed to
developing the entire resource at Syncrude, but said its "first
priority is improving and sustaining the reliability of Syncrude's
base operation."
Syncrude's production at around 300,000 barrels a day has fallen
short of its full capacity, in part due to equipment reliability
issues. Canadian Oil Sands last month cut the project's production
outlook due to extended equipment maintenance, and it said Tuesday
evening that production had been temporarily shut down due to a
malfunction of a coker.
A Suncor spokeswoman declined to comment. Canadian Oil Sands
spokeswoman Siren Fisekci said the expansion plans had been set
after a discussion with all the Syncrude partners, though she said
that Imperial's view on the project means it likely won't go
forward as initially laid out.
Syncrude's other partners include China's Sinopec Corp.
(600028.SH), Nexen Inc. (NXY) Mocal Energy Ltd. and Murphy Oil
(MUR).
FirstEnergy analyst Dunn said that pushing back the expansion
plans and focusing on improving the current project might be good
news for Canadian Oil Sands stock, as it would remove the weight of
a large capital expenditure program that wouldn't pay off for years
and relieve some investor concerns about unreliability of current
operations.
On the Toronto Stock Exchange Wednesday, Canadian Oil Sands
shares closed down less than 1% at C$19.40, while Imperial Oil
shares declined 2.8% to C$40.01 and Suncor shares closed down 4.6%
to C$29.01.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com
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