With an eye on future growth and a boost in synthetic crude oil production, Syncrude Canada partners are pumping $400 million into an environmental retrofit at the company’s Mildred Lake Upgrader at Fort McMurray.
Installing sulphur-reduction equipment on two cokers that refine oilsands bitumen – a tar-like crude extracted from Alberta’s oilsands – should reduce total emissions of sulphur dioxide by up to 60 per cent from current levels of 245 tonnes per day.
The voluntary initiative, which comes as an additional expense to Syncrude’s estimated budget of $5.7 billion to boost the upgrader’s output to about 340,000 barrels per day, will be launched after the expansion is complete in 2005. Up to $15 million will be spent this year on engineering work. The project is expected to be completed in 2009.
In a conference call, Syncrude chair Eric Newell said the project will cut SO2 emissions even while adding 100,000 barrels per day of production. Other emissions, such as particulate matter and metals, will also be reduced by the retrofit, he said.
“The reality is we know there’s going to be significantly more oilsands development in the area, not only at Syncrude but at others, and we feel we have the opportunity we need to reduce our emissions and in effect, make more environmental room for the other development,” Newell said.
“While production is going to rise dramatically in the Wood Buffalo region, we will do it while sustaining high air quality.”
Marcel Coutu, president and CEO of Canadian Oil Sands Trust, the largest investor in Syncrude, said the investment is a good example of the co-operation among Syncrude partners, which include Imperial Oil Resources, Murphy Oil, Nexen, Petro-Canada and Conoco Oil Sands Partnership.
“This obviously is not a project that generates production – it’s about environmental mitigation . . . the partners recognize this is the right thing to do,” he said.
“You’ve got an intensive industry in the Athabasca region that is growing,” said Coutu.
He stressed that this project is distinct from the Kyoto-related drive to reduce carbon dioxide emissions, and its costs will be calculated separately.
In fact, added Newell, “this process will add CO2 emissions, due to the nature of the process. But we’ll be talking with the regulators that we should get credit for that, and not be penalized.”
The project will demand about 500 construction-related jobs and add 22 permanent positions to Syncrude’s operation.
Meanwhile, Syncrude released its first-ever Sustainability Report last week, which documents the economic, social and environmental impacts of Syncrude’s business activities. “It does a reasonable job of laying out the good, bad and ugly of how we’re performing,” Newell said.
The report shows Syncrude recorded record capital investment of $1.9 billion last year, with total recorded pro forma revenue of $3.4 billion last year on shipments of 83.8 million barrels of Syncrude sweet blend.
Pro forma return on capital employed was 25.6 per cent, the fourth year in a row it was more than 20 per cent. Netback per barrel was $20.15 after depreciation, depletion and amortization.
On the environmental front, the company reported emissions of sulphur dioxide were 0.96 tonnes per thousand barrels compared to 1.05 tonnes per thousand barrels in 2001.
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