​Suncor slams Alberta oil production curtailment in 2019 budget announcement

Suncor Energy's oilsands base plant. Image: Joey Podlubny/JWN

Suncor Energy is continuing its vocal opposition to Alberta’s mandated oil production curtailment, which goes into effect on Jan.1, 2019.

The company, which is insulated from wide heavy oil differentials because of its integrated downstream operations, said on Friday that the cut will challenge its operations.

Suncor said its initial assigned cut is higher than the 8.7 percent industry-wide curtailment that Alberta announced in early December.

“The disproportionate allocation of the production curtailment creates several potential unintended consequences, which Suncor is reviewing with the Government of Alberta and the Alberta Energy Regulator,” the company said in its 2019 capital budget statement.

Suncor said the potential unintended consequences include impacts on facility safety and reliability; the level of crude oil upgraded and refined in Alberta, which has limited impact on Alberta egress constraints; its long-term take or pay pipeline commitments for access to the US Gulf Coast; and impacts from the consumption of in-house diesel production used in mining operations.

"Suncor will not put the safety of our employees and contractors at risk," the company said.

Suncor takes issue with how the province is applying the cuts for the Syncrude project, which had an unplanned shutdown earlier this year, as well as its new Fort Hills project, which it said completed start-up at the end of Q3/2018.

“Additionally, the Government of Alberta intervention creates long-term market uncertainty, and reduces any incentive for market participants to invest in crude oil processing facilities or commit to long-term transportation arrangements,” Suncor said.

“In the short term, the Government of Alberta action has resulted in winners and losers in the market, shutting in valuable upgrading throughput and has made transporting crude oil out of the province by rail uneconomic. However, Suncor will continue to work cooperatively with the Government of Alberta and the AER to both identify and mitigate these concerns, and the company is working hard to minimize associated contractor layoffs.”

Suncor announced a 2019 capital program of $4.9 billion to $5.6 billion, which at the midpoint represents a flat capital spend compared to 2018 and a year over year production increase of approximately 10 percent, including estimated mandatory production curtailments, from approximately 730,000 boe/d in 2018.