Suncor boosts capacity at Fort Hills and expands capital budget to $17 billion

Suncor boosts capacity at Fort Hills and expands capital budget to $17 billion

Suncor Energy announced a scope change, construction delay and capital cost increase for its upcoming Fort Hills Oil Sands Mine north of Fort McMurray, Alberta. The revisions were blamed on the Alberta wildfires and changes made to the plant's Secondary Extraction (or Froth Treatment) facility. 

Construction well underway

Construction was reported more than 76% complete by the end of last year. All vessels and major equipment have been received on site and all major modules are in place. The mine and infrastructure plant have been handed over to Operations. The raw water intake system is now operational. The administration building was also reported complete and occupied.

Higher capacity & higher costs

Suncor says it has made a number of "enhancements" to the design of its Paraffinic Froth Treatment (PFT) plant, related to process safety, asset reliability and technology development. The company also says it had material quality issues related to structural steel fireproofing, which needed correcting.

A harsh winter and the spring wildfires also dropped construction productivity last year, causing a slight creep in the budget. Suncor now anticipates capital costs will rise 10% to a range of $16.5 to $17 billion.

However, the facility's nameplate capacity was boosted 8% from 180,000 to 194,000 bbl/day. Suncor was rather vague about the production increase except to say it was the result of "optimization and technical review."

Despite the cost increase, Suncor says the project's capital intensity remains in-line with its sanction guidance of $80,000 to $83,000 per flowing barrel, excluding foreign exchange impacts.

Teck has put out a more cautious forecast and estimates the plant will produce 186,000 bbl/day over the life of the project. Factoring in a lower Canadian dollar (which has declined over 20% since the project was sanctioned in 2013), capital intensity could be as high as $91,400/bbl.

As a point of comparison, capital costs for Imperial Oil's Kearl Oil Sands project (which has a comparable process and product), were estimated at $22 billion for 220,000 bbl/day of bitumen production (or $100,000 per flowing barrel).

A slow but phased start-up

Suncor says it expects to produce bitumen froth (out of the Extraction plant) as early as Q3/2017. The company suggested it may truck froth from the Fort Hills Primary Extraction plant to Suncor's base plant operations in order to commission upstream equipment.

Teck says it expects only one out of three Froth Treatment trains to be operational by year end. The other two trains are not expected to be completed and commissioned until the first half of 2018. The company expects to reach 90% of nameplate capacity by the end of 2018. Suncor is reportedly exploring all options to accelerate ramp-up of production.

Both companies say they have a "high degree of confidence" of the project's cost and schedule through completion by the end of this year.

No problems finding qualified employees

Suncor also says 58% of its operations staff have already been hired. The company calls the labour market "attractive" enabled it to find qualified staff.

Fort Hills is a joint venture between Suncor (50.8%), Teck Resources (20%) and Total E&P Canada (29.2%).

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