In other words, the stakes for getting the next chapter right could hardly be higher. But that may require building less, and doing it better.
“We’re the high-cost barrel around the world,” Mr. Carter said. “And if we want to stay competitive, we have to be constantly vigilant on our operating costs, and also on the cost of building facilities as well.”
‘A MEGAPROJECT, FOR SURE’
Even in its early stages, the scale of a single oil sands project is almost cartoonishly exaggerated. Take Joslyn, whose plans call for a 100,000-barrel-a-day mine that will constitute Total’s first major foray into building and operating an oil sands project. The contracts for early works alone – the process of readying the site for major construction – occupy 30 three-inch binders. The effort required to conduct that early work has consumed just shy of a half million person-hours, including the logging of 1,600 hectares of forest. Once the trees are down, heavy equipment comes in to “clear and grub,” knocking down remaining shrubs and trees, and transforming a green area into a blank canvas of earth.
At one spot on the Joslyn site, it took three months to conduct that process over an area 3.5-by-2.5 kilometres in size. Workers equipped with bulldozers and large dump trucks are clearing and grubbing a hectare every 1.7 hours. In some areas, they then strip away the top layers of earth, sorting into three different types of piles, according to its composition. The material is stored in windrows up to five metres tall and 500 metres long, where it will remain until it is needed to rebuild the landscape years from now. Joslyn has regulatory approval to disturb up to 5,000 hectares at a time. That’s an area 12 times Vancouver’s Stanley park, although the company is nowhere near that today.
Those on site speak casually about the work ahead: a long stretch of giant electrical transmission towers will have to be picked up and placed elsewhere. A paved road passes over what will one day be the mining pit. It will have to move, too, and 18 kilometres of new highway built. At another area of cleared land – this one three by one kilometres in size – plans call for a camp to be set up. It will have 4,000 rooms.
“It’s a megaproject, for sure,” said Rolfe Timm, the site manager for Joslyn, a position that places him in charge of the extraordinary number of moving parts needed to build the mine. The oil sands, he said, “were on the map before, and we’re really getting on the map now.”
Mr. Timm spent much of his career building coal mines. But, he said, “the complexity is much higher in the oil sands.”
That complexity is one of the reasons for investor unease about not just Joslyn, but the array of projects that stretch out across the horizon from it, over a huge area of northeastern Alberta. They are enormously difficult to design and build. They are enormously costly. And that has not gone unnoticed, by investors or executives.
So even as Mr. Timm prepares for another winter of work on the site, he knows the preparations away from his field headquarters have grown complicated. In late July, Steve Williams, CEO of Suncor, announced that he was applying “rigorous scrutiny” to the company’s coming projects. That includes those projects it has partnered with Total to build: Joslyn, another mine called Fort Hills, and an oil sands processing “upgrader” called Voyageur.
It’s a major shift for Suncor, which has abandoned growth targets in favour of pursuing profitable growth – even if it means cutting loose some of its plans. Mr. Williams was explicit: “In principle, there is the opportunity to not progress those projects.”
For Mr. Timm, that means things are in a state of flux. People in what he calls “the project world” are “taking a step back and they’re having a hard look at their projects, and they’re making sure the cost side of the business is optimized and they get the return for the investments,” he said. It’s what “any good business people do.”
A MISSION OF CUTTING COSTS
Today, they call it “sweating the assets.” Three decades ago, it was “getting more bacon out of the pig.”
Either way, it is a gruelling process, and not always done by choice. That was the case at Syncrude in 1989, a year when it cost $17.17 to make a barrel of crude that sold for $21.40. Layer on a 50 per cent royalty, and there was barely anything left to pay back capital. Something had to give. Jim Carter was in charge of figuring out what.
“We had to get the costs down if we were going to make it attractive for further investment,” he said.Report Typo/Error