Government-mandated oil-production limits are hampering crude production in the Alberta patch, with Calgary-based Suncor Energy Inc. reporting a 6-per-cent drop in quarterly production largely because of curtailment rules.
Suncor’s chief executive officer Mark Little told investors Thursday morning during an annual earnings call that curtailment prompted his company to focus on “value over volume” in 2019 and into 2020. Still, the company increased shareholder dividends for the 18th consecutive year, to $0.47 a share. Annual funds from operations hit a record $10.8-billion in 2019, although it suffered a $2.335-billion net loss last quarter and has nixed its long delayed, on-again, off-again plan to add a coker unit to its Montreal refinery.
The company’s total upstream production was 778,200 barrels a day during the fourth quarter of 2019, compared with 831,000 in the fourth quarter of 2018. Suncor’s majority-owned asset Syncrude Canada Ltd. bucked the trend to achieve its second-highest production volumes last year, which Mr. Little said was “quite something when you consider it was in a year where mandatory production curtailments impacted operations.”
But the company’s Fort Hills facility didn’t fare so well, with production restricted to 88,000 barrels a day last quarter. Suncor is keen to increase output at Fort Hills, but Mr. Little said it can’t develop a plan until the facility can run at full capacity – and it can’t run at full capacity until curtailment is lifted.
Alberta’s former NDP government imposed crude production limits in 2019 to help deal with a crushing price differential between U.S. and Canadian oil partly because of a lack of export capacity. Jason Kenney’s United Conservative government continued the program when it took office in 2019 and has extended limits into 2020, despite the fact he and Energy Minister Sonya Savage regularly voice their distaste for interfering in the market.
Market access continues to loom large for the oil industry.
While the Federal Court of Appeal this week rejected an appeal of the approval of the Trans Mountain pipeline expansion, allowing the project to continue, some analysts question just how quickly the market-access issue can be solved.
In a Thursday equity research report, TD Securities Inc. said Alberta may have to reconsider its plan to end curtailment by year’s end and extend the program into 2021.
Kavi Bal, press secretary to Ms. Savage, told The Globe and Mail in an e-mail that the government still hopes curtailment can end this year, but he added no decisions have been made.
“Without market access, we’re going to continue to closely monitor the discount on Canadian oil and make further decisions. We have taken action to increase production allowances with special production allowances on new conventional drilling and oil moved by rail,” he said.
Even as Suncor wrestles with the effects of curtailment, Mr. Little said the company will soon file a regulatory application for its Voyageur South Mine. The Fort McMurray project is slated to replace existing feed from Suncor’s North Steepbank Extension mine, although Mr. Little stressed Voyageur is just one of the options under consideration.
Suncor won’t make a final decision on Voyageur for a decade, but Mr. Little said filing this year was “prudent under the current regulatory process, including the effects of the new impact assessment act.”
Amid talk of expanded oil projects, Mr. Little reiterated Suncor’s commitment to reducing its greenhouse gas intensity by 30 per cent come 2030 via extraction technologies and investments in emissions-reducing projects. Investments include a cross-Canada network of fast-charging electric-vehicle stations through Suncor’s Petro-Canada brand, the $300-million Forty Mile Wind Power Project in Southern Alberta and a $73-million investment in Enerkem Inc., a waste‑to‑biofuels and chemicals producer.
“The one thing that is abundantly clear is the world needs more energy … but we need a lot less emissions,” Mr. Little said.
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