Working around Keystone XL, suncor energy steps up oil production in Canada

Suncor Energy, Canada’s top petroleum producer, announced on Thursday that it would expand its oil production in 2014 by 10 percent in another sign that the Obama administration’s delay in approving the Keystone XL pipeline extension is not holding back growth in the western Canadian oil sands fields.

“We’re set for a strong year of continued production,” Suncor’s chief executive, Steven W. Williams, said. The company announced a capital spending program of $7.45 billion for 2014, $477 million more than it had forecast earlier this year.

Suncor, which is based in Calgary, produces oil and gas around Canada, and has operations in North Africa and the North Sea. But its oil sands operations are the main driver for the company. In the most recent quarter, its oil sands output rose 16 percent from the year before for a record of 396,000 barrels a day, nearly 20 percent of the country’s total oil sands production. The company said it expected its oil sands production to increase again next year to 430,000 barrels a day.

Reports of increased production are coming even as Canadian oil executives are privately questioning whether the Obama administration will ever approve the Keystone XL pipeline, which it has been considering for more than two years.

The extension is intended to transport more than 800,000 barrels a day of oil sands output to refineries on the Gulf of Mexico coast, but environmentalists have made stopping the pipeline their top priority since emissions from oil sands production are higher than for most crude oils consumed in the United States.

But over the last several months, oil companies have sought to go around the dispute by announcing plans for three large rail loading terminals with the combined capacity of transporting 350,000 barrels a day.

The companies are poised to quadruple rail-loading capacity over the next few years to as many as 900,000 barrels a day, whether or not the Keystone pipeline is built. All told, Canada produces roughly two million barrels a day from the oil sands, which the Canadian Association of Petroleum Producers predicts will rise to 5.2 million barrels a day by 2030. In recent weeks Suncor and Royal Dutch Shell have said two long-awaited major projects will go forward.

Suncor’s $13 billion Fort Hills mine, a joint venture with Total of France and the mining firm Teck Resources, had been shelved during the financial crisis of 2008 when future demand growth was in doubt. Its revival should increase oil sands production by 180,000 barrels a day, and it is expected to have a mining life of 50 years.

Suncor executives say they will have sufficient transport capacity to take the production to market. Enbridge, the Canadian pipeline company, will build a $1.4 billion pipeline from the Fort Hills mine to Hardisty, Alberta, where the Keystone pipeline is supposed to originate.

But even if the pipeline extension is not approved to cross the border, Gibson Energy has already announced that it will build a rail terminal in Hardisty to be served by Canadian Pacific Railway with an initial capacity of 140,000 barrels a day.

Shell also recently announced it would move forward with its Carmon Creek project, which is expected to produce 80,000 barrels a day. Industry experts say the project, meant to steam-heat the tarry oil sands out of the ground, will cost up to $3 billion. 

http://www.nytimes.com/2013/11/22/business/energy-environment/working-around-keystone-xl-suncor-steps-up-oil-production.html?_r=0