The almost C$2 billion (US$1.5 billion) price hike at Suncor Energy’s Fort Hills oil sands project is a result of construction delays triggered by the 2016 wildfires as well as changes in its design, the Canadian firm announced last week. The cost of the project is now estimated at C$16.5-17.0 billion (US$12.6-13.0 billion), with Suncor’s existing capital budget of C$4.8-5.2 billion (US$3.7-4.0 billion) expected to cover the increase.
Suncor is developing Fort Hills in partnership with France’s Total and Canadian diversified mining firm Teck Resources.
Suncor said the price hike was an indication of the complexities behind building megaprojects in Alberta’s oil sands region. It comes despite Suncor talking up the benefits of a cooling market for labour and materials as competitors stopped investing in expensive oil sands expansion projects.
Suncor’s CEO, Steve Williams, told analysts on February 9: “Mining investments are coming to an end, not just for Suncor, but for the industry. When we look at the absolute economics of Fort Hills, those are not projects we will be repeating in the foreseeable future.”
The company also released its results for the fourth quarter of 2016 last week. It posted C$531 million (US$407 million) in net earnings for the quarter versus a roughly C$2 billion (US$1.5 billion) net loss in the same quarter of 2015. Suncor has cut staff and sold assets in order to finance the Fort Hills project. It also used the money to invest in the Hebron development, located offshore Newfoundland and Labrador. Suncor is partnering with ExxonMobil on the Hebron project, which is due to start up this year.
Williams said Suncor would spend some of the C$3 billion (US$2.3 billion) of cash on its books on dividend increases and share buybacks as it cuts back spending on big projects.