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Contracts continue to roll for Suncor's Fort Hills oil sands mine

Contracts continue to roll for Suncor's Fort Hills oil sands mine

Suncor Energy continues to award construction and engineering contracts for the greenfield Fort Hills Oil Sands Mine located 90 km north of Fort McMurray, AB. The Suncor-led mining project is a joint venture between Suncor (40.8%), Total E&P (39.2%) and Teck Resources (20%).

Fort Hills will consist of a mining facility, a bitumen production (or extraction) plant, utilities and all supporting infrastructure. The extraction plant will employ a high-temperature paraffinic froth treatment process (sometimes referred to as secondary extraction), reportedly very similar to the Kearl Project operated by Imperial Oil. Some of the key contracts already awarded by Suncor are listed below.

Fluor was awarded the engineering, procurement, fabrication and construction contract for the Utilities scope of Fort Hills. The contract was reported to be worth $1.3 billion. Fluor will apply their proprietary 3rd Gen Modular ExecutionSN technology, a proprietary modular design and execution strategy for this project.

The cogeneration (COGEN) plant was awarded to Spanish firm Tecnicas Reunidas. The turnkey contract will include engineering, procurement and construction of the facility. The COGEN plant will comprise of two 85 MW gas turbines, two heat recovery steam generators (HRSGs) and all related interconnecting systems. The contract was reported to be valued at $250 million and will take 31 months to complete.

The purchase order for all process water pumps was awarded to KSB (a subsidiary of GIW Industries). The order was for 12 large pumps with operating capacities as high as 6,125 cubic meter per hour. 

One of the larger contracts was awarded to South Korean firm SK E&C for engineering and construction of the main extraction facility. SK E&C reported the contract to be worth $2.55 billion and will involve detail engineering for the main extraction plant and the construction of modules in South Korea. The company had previously completed Front-End Engineering (FEED) for Fort Hills in Seoul, South Korea. 

Last year, WorleyParsons announced it was awarded Detailed Engineering contract for the ore preparation plant, primary extraction and tailings. The engineering contract was reported to be worth $140 million.

Construction of the extraction plant already began this past summer and is expected to continue for the next 3 years. In order to manage construction and engineering resources, the construction of Fort Hills will be staggered, with primary extraction due to be completed a year ahead of secondary extraction. Suncor reported that 50% of the facility will be built off-site, or modularized. Smaller modules will be fabricated in South Korea and shipped to Alberta. Some small modules will be reassembled into larger modules in Edmonton, while other modules will be assembled directly on site. Much of the vessels, piping and structural steel will be sourced from South Korea and the Philippines. In order to better manage engineering resources, engineering for the process plant will be split between Calgary, South Korea, India and China.

Honeywell Process Solutions was awarded the Main Automation Contractor for the project and will handle all automation for the facility. The telecommunications contract was awarded to UK based Kentz Corporation. Kentz was recently acquired by SNC-Lavalin earlier this year.

The contract for mine-site development was award to Canadian construction firm Aecon Group. The contract was reported to be worth C$123 million. Work on the mine already began this summer.

Since construction of the Fort Hills Mine would require disruption of existing fish habitat, the project also includes the construction of No Net Loss Lake (NNLL); this compensation habitat will make up for the loss of fishing resources caused by the mine. Data management and monitoring of NNLL was awarded to Vancouver-based Hatfield Consultants. The contract includes hydrometric and water quality monitoring.

TransCanada's Northern Courier pipeline will connect Fort Hills to a tank farm near Fort McMurray, AB. The $800 million project will consists of two pipelines - one to carry bitumen out of Fort Hills and a smaller line to ship diluent back to the mine site. Diluent is used to dilute the bitumen product and reduce its viscosity for storage and transportation by pipeline. TransCanada aims to begin construction on Northern Courier during the third quarter, with an anticipated start up date of 2017.

Enbridge has previously announced plans to build a $1.6 billion Norlite diluent pipeline, connecting the Suncor South Tank Farm to the Enbridge’s Cheecham Terminal. The pipeline will have an ultimate capacity of 490,000 bpd of diluent. Enbridge entered into a 25 year initial contract with Suncor and the Fort Hills partners. Assuming all permits and regulatory approvals are met, the project should begin construction in the summer of 2015 and is expected to be in-service by the spring of 2017.

The Fort Hills lease is relatively high-grade, with some sections of the deposit reported to be as high as 11.4% bitumen. Under current oil prices, the lease contains 3.3 billion barrels of recoverable oil. Once completed, the facility will have a nameplate capacity of 180,000 barrels per day. The project is expected to produce first oil by the end of 2017. Current manpower was reported at 2000 people with construction expected to peak at 5000 people excluding engineering office and fabrication yards.

Ironically, the Fort Hills Project was shelved by then-operator Petro-Canada almost exactly 6 years ago when oil prices plunged from a high of $145 per barrel in July of 2008 to less than $40 by year end. Assuming the project is executed on budget, the Suncor-led consortium is reporting an oil price of $95 per barrel is required for Fort Hills to turn a handsome profit.

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