Canada's Suncor Energy said the majority of its bitumen output by 2040 will be produced using steam-assisted extraction technology, an announcement that marks a significant structural shift for the oil sands heavyweight and which the company said will result in lower costs and higher cash flow over the long term.
Here are three key points from the Suncor announcement:
- Reversing the Production Mix: Suncor is planning a fundamental structural shift in how it extracts oil. Currently, 70% of its production comes from mining and 30% from in situ (steam-assisted) technology. By 2040, the company aims to flip this ratio so that 60% of its output comes from in situ and only 40% from mining.
- Replacing Depleting Mines with In Situ Projects: This shift is driven by the fact that Suncor’s flagship Base Plant mine is expected to be depleted by the mid-2030s. To replace this lost volume, the company is prioritizing the expansion of its Firebag site (aiming to nearly double its permitted capacity to 700,000 bpd) and the development of the new Lewis project, rather than relying solely on high-cost open-pit mine expansions.
- Focus on Profitability and Cash Flow: The pivot is a financial strategy as much as an operational one. CEO Rich Kruger noted that in situ production delivers twice the cash flow per barrel compared to current mining operations. By moving toward these higher-margin barrels, Suncor expects to lower long-term operating costs and significantly increase overall cash flow.
Currently, 70% of Suncor's oil sands crude is produced at its large-scale mining operations in northern Alberta, where trucks and shovels are used to extract the thick, heavy bitumen deposits that lie close to the surface. The remaining 30% comes from deeper deposits that require the use of steam technologies, a method called in situ, to loosen the oil underground before it can be pumped to the surface.
But over the next 15 years, Suncor's production mix will shift so that by 2040, 60% of its oil sands barrels will come from in situ developments, and just 40% from mining, CEO Rich Kruger said at an investor day presentation. The change reflects anticipated declining production from Suncor's Base Plant mine, which is expected to be largely depleted by the mid-2030s, but also reflects the company's desire for lower-cost production.
"All barrels are not created equal," Kruger said. "In situ delivers two times the relative cash flow per barrel compared to mining today."
Already, Suncor's most profitable asset is its Firebag site, which produces approximately 245,000 barrels per day using in situ technology. On Monday, the company filed a regulatory application to expand the site's permitted capacity from an existing limit of 368,000 bpd to 700,000 bpd.
While most of the planned ramp-up of in situ development will come after 2032, Kruger said, Suncor expects to be able to increase output from Firebag to 275,000 bpd by 2028, through a series of debottlenecking and optimization projects.
The company also has a proposed in situ development, called Lewis, which is expected to produce 160,000 bpd and which Kruger said will be developed in phases, sequenced to coincide with the timing of the Base Plant mine's gradual depletion.
Suncor's investor day had been highly anticipated by the market, which has been waiting to hear how the company plans to secure a long-term bitumen supply to replace its Base Plant production.
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One option the company had previously proposed was a new, 225,000-bpd, open-pit oil sands mine expansion, which would be located adjacent to its existing Base Plant operations. But it has been unclear whether such a project would get the go-ahead from Canadian regulators.
Kruger said the company's latest reserve estimate indicates it has 11 billion barrels more in reserves than previously estimated, bringing its total bitumen reserves to 30 billion barrels. Suncor expects to grow its upstream production by about 100,000 bpd by 2028.
