Suncor Energy Inc. will spend nearly $1-billion less to expand in the oil sands next year, with its 2013 budget cutting nearly in half spending in the Fort McMurray region compared to early expectations for 2012.
In a shift of course this year, Suncor pledged to focus on profit over growth in coming years, and launched what it called a “rigorous” review of the costs of new oil sands projects.
Now some of those concerns are being addressed in its spending budget. For 2013, the company plans to spend $1.2-billion on growth projects in the oil sands in 2013. In its 2012 budget, released in November, 2011, it devoted roughly $2.2-billion to oil sands growth.
Overall oil sands spending, which includes the cost of maintaining existing operations, will fall from $5.1-billion in its 2012 budget to $4.2-billion in its 2013 budget. Company-wide capital allocations are actually up however, compared to a revised budget Suncor announced in late October, which cut 2012 spending by $850-million to $6.65-billion. It pointed to reduced oil sands spending as a "key factor" in that reduction. Suncor plans to spend $7.3-billion in 2013.
The company expects oil output in 2013 to rise by 8 per cent, to 570,000 to 620,000 barrels per day.
Much of its $3.3-billion in growth spending next year will go to offshore oil projects, with Suncor saying in a statement that nearly half is “earmarked for advancing exploration and production projects including Hebron, Golden Eagle and East Coast Canada.”
In a statement, chief executive officer Steve Williams said, “Our 2013 capital plan demonstrates our commitment to be absolutely diligent in pursuing those projects expected to provide profitable, long-term growth for shareholders.”
The company provided little detail on its future oil sands projects, which include two oil sands mines and a partly-built upgrader, called Voyageur, that can transform heavy oil sands crude into lighter oil. Mr. Williams offered a cryptic comment on Voyageur in a Suncor statement:
“Together with our joint venture partner, we have accelerated the review of the Voyageur project with the intent to reach a decision by the end of the first quarter in 2013,” he said. “Until a decision is made, we have agreed to minimize spending on this project.”
One analyst read that as a possible hint that Voyageur faces a difficult economic outlook.
The cuts to Suncor’s oil sands budget come after Canadian Oil Sands Ltd. said last week that spending at Syncrude Canada Ltd., another major oil sands miner, will decline by 11 per cent next year.
Others, however, have pledged to stay the course. On Monday, Husky Energy Inc. surprised some analysts when it raised 2013 spending plans to $4.8-billion, up from $4.7-billion in its 2012 budget.
Husky expects to pump 310,000 to 330,000 barrels per day in 2013, up from 301,000 in 2012. It has also raised growth expectations, saying it now believes it can raise oil output by 5 to 8 per cent per year between 2012 and 2017, and gave the green-light to several new heavy oil projects.