Suncor on Track to Expand Oil Sands Production

Anyone who has driven by a gas station within the last few months has noticed that gas prices are volatile. During the course of a day, prices can fluctuate 5 to 10 cents per litre, creating havoc for motorists and turning them into “market timers”.

While consumers look at the short-term price fluctuations, the oil companies must have a longer time frame in mind when considering the development of a major project. This is particularly true with oil sands developers, as approval for project development and construction can take years. This long time frame, however, creates a problem when examining the viability of a project because it is much more difficult to predict what oil prices will be in a few years let alone in a few days. As a result, expansion or development of costly and time-consuming oil sands projects must be based not only on a forecasted oil price, which is vague at best, but more so on the expected cost of production, a factor which oil sands producers have more control over.

Two of the ways in which unit costs can be lowered are through expansions to existing operations or by developing new technologies. This type of approach has led Suncor Energy to propose the $3-billion Voyageur multi-phase development plan for its Fort McMurray oil sands operation. The plan envisages doubling the production from 225,000 barrels (bbl) per day in 2003 to between 500,000 and 550,000 bbl per day in 2010 to 2012.

The Voyageur plan has three main components, including expansion of the existing Millennium Upgrader, increasing bitumen production by developing the Firebag in-situ oil sands project and, finally, seeking additional sources of bitumen and establishing a third oil sands upgrader.

Expansion of the Millennium Upgrader

Following construction of the Millennium upgrader last year, Suncor started constructing a second vacuum unit and in April submitted plans for further expansion at Millennium. The proposal contemplates the construction of two additional coking drums, a sulphur recovery plant and other crude oil processing equipment. The expansion, which should receive approval in early 2004, is expected to cost $1.5 billion and will increase the capacity at Fort McMurray to 260,000 bbl of oil by 2005.

Development of the Firebag in-situ oil sands project

To fill the additional capacity at Millennium, bitumen will be derived by developing the Firebag in-situ oil sands project. Firebag is situated approximately 40 km northeast of the existing oil sands plant and covers an area of approximately 1,000 km2. Firebag, with an estimated recoverable resource of 9.6 billion bbl of bitumen, uses steam-assisted gravity drainage (SAGD) to recover bitumen. Here, two horizontal wells are drilled; the first carries steam, which is injected into the sands, while the other well returns the water and bitumen to the surface for processing.

At present, two expansion phases are planned for Firebag at an estimated cost of $620 million each. Each phase includes drilling the two wells and constructing the necessary surface infrastructure to transport the bitumen to Fort McMurray for further processing. Phase I is well on the way to completion and the company expects to begin steam injection later in October. Each phase is expected to increase production by at least 35,000 bbl of bitumen per day.

Suncor is confident the development of in-situ resources at Firebag will have less of an impact on the environment compared with other recovery methods. This is because the recovery technology is not as disruptive as traditional truck-and-shovel mining, and the plant infrastructure proposed for Firebag is expected to disturb less than 10% of the surface land. In addition, the recovery technology will use recycled water in a closed system for steam generation.

Further phases of expansion at Firebag are planned. Currently, Phase II is in the detailed engineering stage and other phases are expected to come onstream within a few years. With further expansions to the Millennium upgrader, Suncor expects by 2007 production will total 330,000 bbl of bitumen per day. A third upgrader and additional sources of bitumen must be established before daily production jumps to 500,000-550,000 barrels of oil by 2010 to 2012.

Suncor believes the in-situ technology, while relatively new, has the potential to reduce recovery costs as it develops. The company continues to investigate the potential of using carbon dioxide and light hydrocarbons to remove bitumen from the oil sands. By doing so, the amount of emissions produced and the amount of gas needed to generate steam, will be reduced.