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Suncor takes flight with AvGas venture

Screen Shot 2020-06-08 at 2.09.56 PMSuncor has teamed with Japanese partners to fund an innovative new project called LanzaJet that will develop sustainable aviation fuel (SAF) and other products.

Suncor Energy Inc., alongside Japan-based trading and investment company, Mitsui & Co., Ltd., will invest (US)$25 million to establish the LanzaJet demonstration plant at Soperton, Georgia.

The facility will be operated as an integrated bio-refinery by LanzaTech using sustainable ethanol sources to produce almost 38 million litres per year of SAF as well as renewable diesel. Hopes are the plant will start production in early 2022. The initial investment is coupled with participation from All Nippon Airways (ANA) and will complement an existing (US)$14 million grant from the US Department of Energy.

Suncor reports it has contracted to take a significant portion of the SAF and renewable diesel produced at the facility to provide its jet fuel and distillate customers. “These products are very complementary to our existing product mix and we see growth potential in both North American and international markets,” says Mark Little, President and CEO of Suncor. “Suncor is committed to both a low carbon future for our own business and to helping our customers, including in the space of commercial aviation, realize their vision of a sustainable future.”

Heading LanzaJet as CEO is Jimmy Samartzis, an aviation industry veteran who was pulled from his role as a Director with the Fermi National Accelerator Laboratory.

 

The LanzaJet process can use any source of sustainable ethanol for jet fuel production, including, but not limited to, ethanol made from recycled pollution, the core application of LanzaTech’s carbon recycling platform. Commercialization of this process, called Alcohol-to-Jet (AtJ) has been years in the making, starting with the partnership between LanzaTech and the US Energy Department’s Pacific Northwest National Laboratory (PNNL). PNNL developed a unique catalytic process to upgrade ethanol to alcohol-to-jet synthetic paraffinic kerosene (ATJ-SPK) which LanzaTech took from the laboratory to this pilot project.

Contact OCTANE editor Kelly Gray at Kgray@ensembleiq.com


Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor CEO predicts slow recovery for sector from pandemic demand crunch

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Suncor president and CEO Mark Little. File photo: Jeff McIntosh Canadian Press

CALGARY – Consumer demand for fuel is growing slightly after a sudden decline due to measures to deal with the COVID-19 pandemic but the CEO of Suncor Energy Inc. says he doesn’t expect a full recovery for his company or the Canadian energy sector until at least 2022.

The Calgary-based oilsands and refining giant surprised analysts by cutting its quarterly dividend by 55% to 21 cents per share as it reported a first-quarter net loss of $3.525 billion on Tuesday.

It had 18 years of consecutive annual dividend increases, with the latest announced in February.

The cut was necessary as the company resets its target of breaking even at a West Texas Intermediate price of US$35 per barrel, down from the previous mark of US$45, said CEO Mark Little on a conference call on Wednesday.

“Although we expect the crude market to substantially recover by 2022, the risk of an extended period of economic uncertainty, translated into weaker commodity prices and higher volatility, remains possible,” he said.

“In the second quarter, we know our industry is being challenged by … a significant supply and demand imbalance which has resulted in the largest collapse in crude prices ever. These market conditions require decisive leadership and action.”

The company, which sells fuel across Canada through its Petro-Canada network, has seen a reduction in demand of 50% for gasoline, 70% for jet fuel and 20% for diesel, Little said.

As North American oil storage fills to near capacity, any rebound in upstream oil production must be led by recovery in the downstream and that means it depends on when governments reopen the economy and consumers feel confident about travelling again, Little said.

There will be further delays as the high level of crude inventories is drawn down, he added.

Chief financial officer Alister Cowan said on the call he expects that Suncor’s gross debt of about $20 billion will grow by $2 billion or $3 billion this year, but the company will break even on a cash flow basis in 2021.

In a report, analyst Michael Dunn of Stifel FirstEnergy estimated the dividend cut will save Suncor about $1.56 billion per year.

“While not altogether surprising, the cut was not a sure thing given Suncor’s liquidity and track record of dividend increases. We agree with the move,” he said.

Suncor’s capital spending plan for 2020 is being cut to $3.8 billion, a further reduction of $400 million compared with its recent guidance and down $1.9 billion or about one-third compared with its original 2020 plan.

It added it intends to cut operating costs by $1 billion or 10% this year compared with 2019 levels.

Suncor registered an impairment charge of $1.38 billion on its 54.1% share of the Fort Hills oilsands mine it operates and $422 million against its share of the East Coast offshore White Rose and Terra Nova assets.

Suncor also recorded a $397-million after-tax inventory writedown, as well as a $1-billion unrealized after-tax foreign exchange loss on U.S. dollar denominated debt.

Due to lower demand for refined products, Suncor is reducing its outlook for refinery throughput to between 390,000 and 420,000 barrels per day from the previous goal of between 440,000 and 460,000 bpd.

 

 


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Suncor defers Montreal refinery project to focus on low cost oilsands expansions

Suncor Energy Inc.’s on-again, off-again plan to add a coker unit to its Montreal refinery to allow it to process heavier barrels of oil, including oilsands bitumen, is off the table as it shuffles its spending priorities.

The $2-billion project has been shelved as the company focuses on low-cost oilsands expansions, projects that will help reduce emissions and cost-cutting digital technologies, CEO Mark Little said on a conference call to discuss fourth-quarter results.

Little said the company is listening to investors as it aims to generate more free cash flow while keeping spending in check.

“Some of the concern we see from the investors is, ‘Wow, you’re going to plow $2 billion into Montreal, are you sure?’,” he said.

“We spent a lot of time thinking about that and running all the analysis and concluded that actually wasn’t the prudent investment for the shareholder.”

Suncor also elected to defer sanctioning of its proposed 40,000-barrel-per-day Meadow Creek oilsands project, which would produce bitumen from wells, until 2023 at the earliest, Little said.

Instead, it will invest in boosting production from its existing similar Firebag facility to nameplate capacity of 203,000 bpd by 2021 and then potentially add 20,000-30,000 bpd by 2024-25.

It also plans to build lower-emission co-generation units at its Base Plant this year and begin construction of a $300-million wind power project in southern Alberta.

The Calgary-based energy giant reported a net loss of $2.3 billion for quarter ended Dec. 31 due mainly to asset impairment charges of $3.3 billion.

That includes $2.8 billion due to lower forecast prices for heavy oil from its Fort Hills oilsands mine in northern Alberta and $393 million linked to higher capital cost estimates for the West White Rose expansion project off the coast of Newfoundland and Labrador, which is expected to begin producing oil in 2022.

Husky Energy Inc., which is the major owner and operator of the White Rose field, said its numbers align with those of Suncor.

“As indicated last year, we had some initial challenges with productivity at West White Rose, and we are now seeing good execution and are on track,” said Husky spokeswoman Kim Guttormson, who declined to give a detailed cost estimate for the expansion.

Suncor said it expects its share of production from the White Rose field will average about 8,700 bpd over its life and its share of future capital expenditures is about $1.4 billion.

Suncor shares fell by as much as 4.6% in early trading on the Toronto Stock Exchange, although it announced an 11% increase in its quarterly dividend and a $2-billion extension of its program to buy back shares.

Analysts said its production results were generally in line, but misses on its operating and capital costs in the quarter were slightly negative.

Little also announced Suncor will file an application in the current quarter for a project to extend its base oilsands mine to a new area when its current resource is depleted in about 2035.

The project represents one of many options and wouldn’t be officially approved for at least a decade, he stressed.

“We feel that filing in 2020 is prudent under the current regulatory process, including the effects of the new (federal) assessment act, to ensure adequate time is provided for the regulatory process,” he said.

“Should we choose to extend the mine, the plan is to incorporate non-aqueous extraction technology which significantly reduces the costs and environmental impacts of mining oilsands versus our current operations.”

Suncor reported its MacKay River oilsands project, which produces about 30,000 bpd from wells, was shut down following an operational problem in December and is not expected back to be back on line until after March.

The outage won’t affect 2020 guidance for the company, Little said, because the loss of barrels can be counted under Alberta’s ongoing oil production curtailment program.


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Petro-Canada completes Canada’s Electric Highway

Milton bannerPetro-Canada, a Suncor business, has completed its coast-to-coast network of electric vehicle (EV) fast chargers. With locations from Nova Scotia to British Columbia, EV drivers will now be able to travel across the country with access to a fast charge network.

“With more than 100,000 electric vehicles on the road in Canada and an average of 4,000 EVs added each month, we know that this is an important step in meeting the current and future driving needs of Canadians,” Mark Little, president and chief executive officer, Suncor, said in a release. “We want to be part of the total solution to meet energy demand and reduce the carbon footprint of the transportation system. Canada’s Electric Highway is one of the ways we are able to support the total solution.”

spark-img-3From Victoria, B.C. to Stewiacke, N.S., EV drivers can now charge up at locations along the Trans-Canada highway. With more than 50 sites located in small towns and big cities from the Rockies to the Maritimes, each site features DC fast chargers with both CHAdeMO and CCS/SAE connectors, which support a broad selection of vehicles. The chargers can provide up to a 200 kilowatt charge – enough to provide an 80% charge to most EVs in less than 30 minutes. The units are also capable of 350 kilowatt charging with future upgrades.

In a statement, the company said: “The landscape of fuelling is changing – consumers are looking for choices for low carbon fuel alternatives. Suncor and Petro-Canada will continue to work with governments at all levels to support the transition to a low carbon economy and to provide Canadians with choices for fuel.”

Canada’s Electric Highway is supported in part through $4.6 million in funding from the Government of Canada’s Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative.

“Zero emission vehicles are critical to our clean energy future and to combatting climate change. Our government is supporting initiatives like Petro-Canada’s coast-to-coast network of EV fast chargers; putting more electric vehicles on our roads, reducing pollution and creating stronger and more sustainable communities,” said Minister of Natural Resources Seamus O’Regan.

 

Petro-Canada operates more than 1,500 retail stations and 300 Petro-Pass wholesale locations nationwide.


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Suncor keeps 2020 oil budget flat, approves $300 million wind farm project

Oilsands giant Suncor Energy Inc. says it will keep capital spending related to its oil operations flat next year while moving forward with a new $300-million wind power project in southern Alberta.

The Calgary-based company says its capital budget for 2020 will rise by about 10% to a mid-point of $5.7 billion from this year’s $5.15 billion.

SunBridge is Suncor's first renewable energy project. Located near Gull Lake, Saskatchewan, the facility generates enough zero-emissions electricity to offset about 33,000 tonnes of carbon dioxide per year.

SunBridge is Suncor’s first renewable energy project. Located near Gull Lake, Saskatchewan, the facility generates enough zero-emissions electricity to offset about 33,000 tonnes of carbon dioxide per year.

Suncor announced it has sanctioned the first 200-megawatt phase of its Forty Mile Wind Power Project, which received Alberta regulatory approval last spring. About 25% of the capital cost is expected to be incurred this year and the remainder in 2020 and 2021.

Suncor say the project is a key component of its sustainability strategy as it targets cutting its greenhouse gas intensity by 30% by 2030.

It says the 2020 capital budget increase also includes $300 million for its $1.4-billion project to replace coke-fired boilers at its oilsands base camp in northern Alberta with cleaner natural gas-powered co-generation units for heat for the plant and electricity for the provincial power grid.

It also plans to invest $150 million in digital technology initiatives and $50 million to improve efficiency at the Syncrude oilsands mining complex by connecting it by pipeline with Suncor’s nearby base camp works.

“Looking forward to 2020, we will continue to focus on value over volume, investing in high-return projects that are largely independent of pipeline constraints and commodity price volatility, to deliver on our $2-billion incremental free funds flow target by 2023,” said CEO Mark Little in a statement.

Upstream production is expected to increase by about 5% to about 820,000 barrels of oil equivalent per day.


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Suncor partners with Microsoft for digital transformation

Suncor is embarking on a multi-year strategic alliance with Microsoft Canada as a part of the company’s effort to further accelerate what it calls its “digital transformation journey.”

Suncor has selected Microsoft as its cloud provider and will tap into the company’s full range cloud solutions to empower a connected and collaborative workforce, upgrade data centres, and increase analytics capabilities. Suncor will also collaborate with Microsoft on innovation projects, drawing on expertise and opportunities from both organizations.

“We’re excited to be partnering with Microsoft because they’re a global leader in the digital technology space, and they will bring value and insights into global innovation best practices,” Mark Little, Suncor president and CEO, said in a release. “This is an example of how we are driving to improve our business in ways that were not possible before – to make our people safer, increase reliability and productivity, reduce costs and improve sustainability.”

Suncor will move towards cloud-based computing with Microsoft Azure, which is expected to enable the rapid deployment of new technologies to improve safety and productivity through artificial intelligence, machine learning, enhanced automation, and Industrial IoT (IIoT) and visualization.

“Although we are an industry leader in many respects, we still have much to learn in the digital space, which is why we’re working with a number of organizations including Microsoft to challenge us,” said Little. “Similar to how we partner with and learn from innovators across our physical value chain, we’re choosing to partner with the experts in digital innovation.”

“Suncor is embarking on a journey to transform the energy industry. They are creating new business value for their customers, empowering and upskilling their workforce, and innovating for a sustainable future,” said Kevin Peesker, president, Microsoft Canada. “The world’s leading companies run on our cloud, and we look forward to helping Suncor accelerate their digital transformation with Azure, Dynamics 365, Surface and Microsoft 365.”

Through this alliance, Suncor expects to improve the employee and customer experiences across their business, from front-line workers in industrial settings, to gas station attendants at Petro-Canada, to office workers. The company plans to draw insights from data that will open new ways to drive improved economic, social and environmental performance.


Alberta oil cuts, close the taps bill are unwelcome interventions: Suncor CEO

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh Canadian Press

Incoming Suncor president and CEO Mark Little addresses shareholders. Photo: Jeff McIntosh 

 

The new CEO of Suncor Energy Inc. says he doesn’t want the Alberta government to carry through on its threat to cut off shipments of oil and refined products to B.C. if its western neighbour continues to interfere with pipeline growth.

Following the company’s annual meeting in Calgary on May 2, Mark Little said any such action resulting from the proclamation of Bill 12 by the new United Conservative government this week would create a barrier between Suncor’s refinery assets in the Edmonton area and its customers in British Columbia.

He said Suncor is using the Trans Mountain pipeline to the West Coast now to bring gasoline and diesel to the B.C. market and it supports pipeline expansion so that it can grow that market.

“We’re hoping that through the government’s negotiations this can get sorted out, because the last thing we want to do is have an impediment in serving our customers,” he said.

He added he views the Alberta bill as “a fairly significant intervention into a market to try to resolve a dispute.”

Earlier in the day, Little told analysts on a conference call that Suncor remains opposed to another Alberta market intervention, its oil production curtailments, in spite of their “slightly positive” impact on first-quarter financial results.

The results show the value of Suncor’s integrated business model and extensive pipeline contracts at a time of turmoil in the industry, he said.

“In the fourth quarter of 2018, there were low benchmark prices with wide heavy and light crude oil differentials. Whereas, in the first quarter of 2019, there were higher benchmark prices and narrow differentials,” Little said.

“Both quarters, we were able to generate significant funds from operations.”

Little officially took over as chief executive from Steve Williams at the annual meeting in downtown Calgary. Williams was given a standing ovation by shareholders after a speech about the company’s accomplishments during his seven years as CEO.

Alberta’s decision to impose quotas on its biggest oil producers was designed to free up pipeline space and draw down crude storage after price discounts on western Canadian oil spiked last autumn.

The move is supported by oilsands producers like Cenovus Energy Inc., whose CEO pointed out last week the resulting higher prices have helped boost royalties to Alberta’s treasury.

But it’s opposed by rivals such as Imperial Oil Ltd. and Husky Energy Inc. who note that crude-by-rail exports plunged to 131,000 barrels per day in February from an all-time high of 354,000 bpd in December _ which means oil export capacity was actually reduced.

Both points are accurate, said Little, but he added the confusion means Suncor and others are reluctant to spend money on new projects.

The UCP government has supported curtailments brought in by the NDP and favours gradually reducing the cuts over the coming year.

Suncor said its quota strategy involved maximizing highly profitable upgraded synthetic crude oil volumes, while throttling back lower-margin mined raw bitumen, a move that has temporarily increased its operating costs per barrel.

The company said average realized bitumen prices jumped to $62.92 per barrel at Fort Hills in the first quarter, up from $30.57 in the fourth quarter of 2018, as oil price discounts eased.

The Calgary-based oilsands producer and refining giant reported net income for the first three months of the year that beat analyst expectations thanks to higher oil prices, record downstream results, growing oilsands production and a $264-million after-tax insurance gain on its assets in Libya.

Net earnings were $1.47 billion or 93 cents per share in the quarter, up from $789 million or 48 cents in the same period of 2018.

Its operating profit came to $1.2 billion, compared with $985 million in the first quarter of 2018.

It had total oilsands production of 657,000 barrels per day in the first quarter, compared with 572,000 bpd a year earlier, thanks to gains at the expanded Fort Hills oilsands mine and higher contributions from the Syncrude mine and upgrader, in which it has a 58.7 per cent stake.

The company says refining and marketing delivered record operating earnings of $1 billion, up from $789 million in the first quarter of 2018.

Suncor said production from its East Coast offshore Hebron project increased to 18,300 bpd (net to Suncor) and is continuing to grow following the completion of a fifth production well in the first quarter.

It said first oil was achieved ahead of schedule in the quarter at the Oda project offshore Norway, in which it has a 30 per cent stake.