Suncor Prepares to Take Over Syncrude Operations As Oil Sands Consolidation Continues

0
55


Suncor Energy Inc. is set to take over the operation of Syncrude Canada Ltd., one of the country’s largest oil sands projects, in the latest example of consolidation in Alberta’s pandemic-ravaged petroleum sector.

Syncrude is a joint venture between Suncor Suncor, Imperial Oil Resources Ltd. Imperial, Sinopec Oil Sands Partnership Sinopec and CNOOC Oil Sands Canada CNOOC. Despite being owned by heavyweights in the oil industry, the mine itself is managed by Syncrude’s separate governance structure.

That will all change by the end of 2021, when Suncor takes over operation of the mine, the Calgary-based company said Monday night.

The story continues under the ad

Suncor President and CEO Mark Little told The Globe and Mail on Monday evening that Imperial, Sinopec and CNOOC have all agreed to the move in principle, although it has yet to receive approval. official.

No cash changes hands as part of the deal. Instead, Syncrude will become another of Suncor’s multiple operating assets – similar to its Fort Hills mine, its oil sands base plant, and the in-situ assets of MacKay River and Firebag.

Little said the move will strengthen the company’s business in the Athabasca region and give Syncrude a more competitive advantage. In fact, Suncor recently completed two pipelines between Syncrude and the base plant.

“The owners have worked for a few years trying to figure out how we make Syncrude the most globally competitive company it could be, and the bottom line is that Suncor is operating it,” Mr. Little said. .

Suncor estimates that this change will result in savings of approximately $ 300 million, primarily by consolidating office functions and eliminating duplication in areas such as logistics and infrastructure.

“There will be a downsizing associated with it. You can understand how difficult it is because it results in job losses, ”Mr. Little said.

The oil sector faces persistently low prices and squeezed demand due to the COVID-19 pandemic, challenges, Little said, lend urgency to changes to reduce costs.

The story continues under the ad

“We cannot continue to duplicate work. We need to find better ways to move forward, ”he said.

“We have to be able to figure out how to generate more cash from these companies, and working together and taking that step makes a lot of sense.”

The agreement signals the first major change in governance of Syncrude since the operation was created 50 years ago, Mr. Little said.

Suncor has steadily taken over operating stakes in recent years, dating back to 2009 when it merged with Petro-Canada – a transaction that earned it a 12% stake in Syncrude.

This small acquisition has placed the massive oil sands project within Suncor’s long-term vision, Little said.

In February 2016, Suncor purchased Canadian Oil Sands Ltd. and that company’s 37% stake in Syncrude for $ 6.6 billion. A few months later, in April, he paid $ 937 million for American Murphy Oil’s five percent stake in the project.

The story continues under the ad

In February 2018, Suncor bought another 5%, paying $ 920 million for the stake held by Mocal Energy Ltd.

She now owns just under 59% of Syncrude, and Mr. Little doesn’t see that changing.

On the contrary, he said, other partners support the decision to “strengthen the long-term interests” of the oil sands project.

“It’s always easy to own [an asset] outright, but we don’t expect that to happen someday, ”he said.

Your time is precious. Receive the Top Business Headlines newsletter delivered to your inbox in the morning or evening. register today.

LEAVE A REPLY

Please enter your comment!
Please enter your name here