Rick George, President and CEO, Suncor Energy
Economic Club of Canada
Toronto, Ontario
October 7, 2009

CHECK AGAINST DELIVERY

It’s a real pleasure to have the opportunity to speak to you today.

It’s been a challenging year for the global and Canadian economies, for the energy sector and, I am certain, for every one of you in this room.

At Suncor, we’ve come off a particularly eventful few months that saw our company realize a historic merger with Petro-Canada, to create what we believe is a global competitor, although one firmly grounded here as a flagship Canadian corporation.

Now, there’s a famous saying, “May you live in interesting times.”

I’m told that scholars continue to debate whether it’s meant as a blessing or a curse, and let me tell you, I get that.  Because interesting times like the ones we are now living through are filled with both challenges and opportunities.

In my remarks today, I want to look at both sides of that coin. I will outline some of the exciting opportunities we see arising from this recent merger — not just for our company, but for the Canadian energy industry and our economy as a whole.

I also hope to provide a frank assessment of some of the outstanding challenges that must be resolved if we are to realize those opportunities — including very real concerns about how we can develop this country’s vast energy resources in a responsible and environmentally sustainable way.

What I hope you will come away with is a better sense of the possibilities on the road ahead for achieving economic growth, enhanced energy security and a renewed commitment to the principles of sustainable development.

It’s a positive vision that I believe is within our grasp if we have the will and the wisdom to seize it.

In this regard, I am mindful that, in just a few months, Canada will realize the fulfillment of another positive vision as we host the 2010 Winter Olympics. Suncor is a proud National Partner for these and the Paralympic Games.

As you all know, the Olympics are a celebration of excellence; a celebration of what can be achieved when individuals and nations set ambitious goals and then work tirelessly to reach them.

The same is true when it comes to determining our energy future. We need to envision success, and then we need to develop a clear roadmap for achieving it. And that includes looking past short-term pain to long-term gain.

Strength in Unity

Before I look ahead, I think it’s useful to reflect for a moment on the events of this past year.

We can probably all agree that adversity is sometimes a great teacher. So the real question is: what have we learned from the global credit crisis and resulting turmoil that erupted last year?

One of the biggest lessons is just how closely linked the global economy has become, and how easily one breach in the chain can unleash major consequences.

For those of us in the energy business, 2008 was another reminder of the volatile nature of commodity markets; when world oil prices can slip from unsustainable highs of over $120 per barrel to the equally dubious lows of $30 per barrel in a matter of months. Let’s just say it’s a lesson about the need to prepare for any and all eventualities.

Like almost everyone else, Suncor’s initial response to the global economic situation was to retrench and regroup.

When the market storm hit, Suncor was implementing the final stages of a multi-billion-dollar growth strategy to nearly double our existing production capacity.
We put most of those growth projects on hold and dramatically scaled back our capital spending. These were difficult decisions, but they were necessary to protect the long-term value of our assets.

As we looked around at the changed landscape for energy investment, we saw that an elite few continued to grow through the bottom part of this cycle. I am thinking of super-majors like America’s Exxon Mobil and Europe’s Royal Dutch Shell and Total. But the same is true of PetroChina, which recently made a new $2 billion investment bid in Canada’s oil sands.

We needed a way to allow Suncor to do something similar so we could look again at investing and coming out of this cycle stronger than ever rather than just pulling back on capital spending.

We believe we have found that path forward through our merger with Petro-Canada, another proud Canadian company with strong assets that complement and enhance those held by Suncor.

It’s been a very fast-paced six months.

• The deal was announced in March;
• Shareholder approval was received in June; and
• The Competition Bureau cleared the deal in July.

Nine weeks later, we are now working through capital and operating efficiencies that we expect to result in at least $1.3 billion in synergies. These are necessary steps to get us on a footing where we can compete on the global stage as one of the largest independent energy companies in the world.

The new and expanded Suncor is not a branch plant of an international operation. We are the real Canadian deal. And that gives us a unique opportunity — and a responsibility — to develop publicly owned energy resources in ways that are consistent with Canadian values, and maximize the benefits for our country and all of its citizens.

Although the synergies I just spoke about have resulted in some difficult decisions and job losses, perhaps the biggest opportunity we see with this merger is an improved ability to invest. And overwhelmingly, right here in Canada.

That means many of the growth projects Suncor and Petro-Canada put on hold last year could again be in play much sooner than if the merger had not gone ahead.
We are currently reviewing all of those projects to make sure we proceed with the right ones, at the right time, in the right way.

At this point, some of you may be thinking, “Well, this is all fine news for Suncor and its shareholders, but what does it have to do with securing Canada’s energy future and benefiting average Canadians?”

The short answer: a tremendous amount.

The new Suncor is a company with assets spanning all the way from the B.C. Interior to offshore Newfoundland; from the North Sea to Libya; and from the High Arctic to Colorado. But the vast majority of our assets are here in Canada.

Canadians stand to benefit in a variety of ways through increased jobs, government tax revenues and royalties as well as investments in the communities where we operate. And that’s no small thing.

We all have aspirations for the kind of society we want to build for our children and grandchildren. We want to improve our health care and education systems and play a leadership role on the environment.

But how do we finance these aspirations?

With so many other sectors of the economy struggling, we will be looking increasingly to the energy sector to fuel the economic growth that helps governments fund important public programs. 

That’s one reality. Another is that, for the foreseeable future, hydrocarbons will continue to play a dominant role in meeting both Canadian and global energy demands; especially in the transportation sector where there is no viable alternative.

And as conventional oil becomes increasingly difficult to find and develop, oil sands crude will play an even bigger role.

We need to drive research and development into new and emerging sources of energy, be it wind power, biofuels or geothermal. Companies like Suncor are doing just that.

But bringing these alternative sources to market in a meaningful way will take many years to accomplish.

In the meantime, I would argue we have some serious choices to make. We can either support the responsible development of Canadian energy resources like the oil sands, or we can defer to imported oil, which may or may not be developed responsibly; but is certainly not developed with Canadian interests in mind. 

Challenges to Development

This brings me to what is clearly the biggest challenge the energy industry currently faces. That is whether we can develop the oil sands in a way that serves a triple bottom line — generating economic growth while also promoting social well being and protecting the environment.

For our industry’s harshest critics, the jury is already in. They have declared the oil sands to be “dirty oil” the world should have nothing to do with.  We saw an extreme example of that view in the past weeks when Greenpeace targeted oil sands sites in Fort McMurray and Edmonton.

It’s easy to stage made-for-TV antics to raise money toward a cause. It’s a lot more difficult to work collaboratively toward real solutions that benefit all of society.

But we do need to work together. We need to have realistic vision for Canada in mind — and I will come to back to that.

Maybe it’s just the engineer in me, but to get to real solutions, we need to work from the facts, not misleading sound bites and half truths. I take exception to some of the misleading information that’s being put out there.
Let’s address the elephant in the room — the carbon footprint created by oil sands development.

It’s been widely asserted the carbon footprint of oil sands crude is three to five times higher than other crude oil products.

It’s simply. Not. True.

First, you need to factor in the often lower environmental standards in other producing countries, as well as the greenhouse gas emissions to transport that oil to market and to refine it and — most importantly — to consume it. 

Independent studies show that oil sands crude is only marginally more carbon-intensive than many other crude sources. In fact, on this life cycle basis, we are actually less carbon-intensive than many conventional sources.

Second, there’s the fact that, per barrel, synthetic crude from the oil sands yields more transportation fuel than conventional oil because by the time it gets to the refinery gate, it’s actually about the cleanest barrel of oil there is.

Some would have you believe that Canadian oil sands is the number one culprit when it comes to greenhouse gas emissions. But the facts are otherwise.

Canada is currently responsible for two per cent of global greenhouse gas emissions. Our industry, in turn, is responsible for five per cent of Canada’s emissions. Put those numbers together and you get about one tenth of one per cent of global emissions — a small fraction of what is produced by the transportation sector and coal-generating plants, among others.

Shutting down the oil sands industry and all of the refineries it feeds across Canada would not result in a measurable difference in global greenhouse gas emissions.

A second common criticism has to do with water use.

There’s no doubt oil sands extraction is very water-intensive. But again, a sense of proportion is important. For example, there have been claims that northern Alberta’s mighty Athabasca River is being drained to support oil sands development. In reality, the amount of water the industry currently withdraws from the Athabasca amounts to about one per cent of the average annual river flow.

Let me be clear: I don’t want to issue a blanket dismissal of all criticism. There are legitimate concerns about the environmental impact of oil sands development. Our industry faces some clear and significant challenges, and I like to think I understand them as well as anyone.

Shortly after I became Suncor’s CEO in the early 1990s, our management and board made an important decision: sustainable development would be the cornerstone of our business.

Not only did we become one of the first major energy companies to adopt a climate change action plan to better manage our greenhouse gas emissions, we also made industry-leading investments in renewable energy products. 

We are one of Canada’s biggest investors in wind power and biofuels. In fact, just last week, we announced a $120 million expansion to our ethanol plant near Sarnia.
We moved on these fronts before it became the popular thing to do.

And progress has been made.

Compared to 1990, the oil sands industry has harnessed technology to reduce the amount of carbon we emit for each barrel of oil produced by 30 per cent. Suncor alone cut intensity by nearly half. That puts us among North American leaders on this front along with Ontario’s steel industry.  

Suncor has also reduced absolute water use by 40 per cent over the past five years. And we are now driving new technologies that hold the potential to make oil sands tailings ponds a thing of the past.

Does more need to be done? Absolutely.

That is why we recently adopted a series of long-term environmental performance goals that will hold our company’s feet to the fire when it comes to further reductions in water use, improved energy efficiency and a substantial increase in the reclamation of disturbed land. 

Just as technology and innovation first allowed us to unlock the oil sands and make production economically viable, it is now helping us to develop the resource in environmentally responsible ways.

Canadians can — and should — expect continuous improvement in this industry’s environmental performance.

For all these reasons, I believe we need to change the conversation when it comes to so-called “dirty oil.” Canadians need to know that, increasingly, the gasoline they put in their tanks comes from oil sands crude. When you look at many of the import alternatives — production from countries that have little or no regulatory oversight, disclosure or environmental controls — I think we stack up pretty well. 

Finally, let me just say this: the new Suncor represents the joining of two progressive energy companies with a demonstrated willingness to engage, rather than merely confront, industry critics.

We believe no one has a monopoly on good ideas and we will work with anyone who has constructive proposals for how we can better develop this legacy resource for Canadians.

A Century of Opportunity

While our industry continues to face significant challenges, the journey we are on also presents Canadians with a lot of positive opportunities.

With reserves second only to Saudi Arabia, the oil sands industry is not about energy production for the next five years or even 50 years, but for a century and beyond.
So if we do things right, we have the opportunity to set a course that will benefit generations to come. This truly is a century of opportunity.

More than one third of Canada’s crude oil production now comes from the oil sands. In the North American context, Canada is already the most important energy supplier to the United States and close to half the crude we export is from the oil sands.

Yet another reason this resource base is so critical is that it represents a largely untapped source of new oil at a time when conventional reserves in North America are on the decline.  Alternative sources of energy can’t fill the gap, so oil sands can and should play a bridging role in the energy mix.

Finally, there’s the issue of energy security.
Many of the countries where conventional oil reserves are still abundant are plagued by political and economic instability. For Canadians and for our neighbours to the south, Canada is and should be seen as a pillar of reliable and responsible resource development.

For Canadians, there are significant economic and social benefits:

• Oil sands investment is estimated to generate $1.7 trillion in economic activity over the next 25 years.
• For every dollar oil sands companies earn, about 54 cents is paid to governments in taxes and royalties. That’s at least $306 billion in new government revenues over the next 25 years. As we slug our way out of recession, that will be welcome revenue.
• Capital investment in the oil sands, projected to be $50 billion in 2009 and 2010, now exceeds spending for all manufacturing across Canada.  Although the fact is: a lot of that spending goes to manufacturing and heavy industry such as steel production right here in Ontario. Last year, Suncor alone spent almost half a billion dollars working with nearly 1,800 Ontario businesses.
• Oil sands development is truly a national success story. Our industry directly or indirectly employs about half a million Canadians. Forty-four per cent of those jobs are outside Alberta, and a big number of pay cheques are going right back to Corner Brook, Port Hawkesbury, Sudbury and other Canadian towns and cities. 

In sum, we have a world-class resource base for which there is a proven and growing demand and tremendous benefits for Canadians in bringing that resource to market.

So what is missing from this picture? I believe it all comes back to the need for a carefully crafted, comprehensive national energy strategy.

A Canadian Energy Strategy

The Canadian energy sector is simply too important to manage passively or leave to chance. The Obama administration is moving forcefully on both energy security and climate change issues.

If Canada is to be a policy maker rather than a policy taker, we need to get our own energy house in order — and quickly.

What could a sustainable national energy strategy look like? I don’t pretend to have all the answers, but here are a few possibilities:

• We need to assess our likely energy requirements 10, 20 and even 50 years down the road, based on what kind of society we want to build.
• We should determine the mix of proven and potential energy sources that can best meet those domestic requirements, and identify the additional resources we want to develop for export to sustain economic growth, provide jobs and generate government revenues that fund essential public services.
• We need to understand the future is about increasing energy choice, not restricting it. The global population is set to grow from 6 to 9 billion people and they will need energy to develop their societies. We should work to ensure alternative sources such as solar, wind, geothermal and biofuels are part of the mix and use conventional sources to help drive research and development of alternatives and new technologies.  
• We must find ways to build the required infrastructure to deliver energy where it is needed and when it is needed. The current system of pipelines and transmission lines are testament to what happens when you don’t have a clear national energy strategy.
• Targets and goals for reducing greenhouse gas emissions must be an integral part of this national plan. In fact, a sound energy strategy will in large part become our climate change strategy.
• A sustainable energy strategy must go well beyond the issue of basic energy production. After all, up to 80% of greenhouse gas emissions from a barrel of oil are generated through the tailpipe.
• Improved vehicle energy efficiency, better standards for building construction, more mass transit and a renewed conservation ethic all need to be part of any national plan.

I think that as we look forward and work through these issues, we sometimes forget what we all have in common.

We have to remember we are all consumers — we all use energy in various forms every minute, every day. Therefore, we all have a stake in mapping our energy future.

For that reason, the process of building a national energy strategy must be inclusive. In addition to government and industry, we need to hear from a variety of voices, including consumers, researchers, social activists and environmental advocates.

As Canada’s premiere energy company, the new Suncor will also have an important role to play.

What we will all require is a clear vision and commitment to engage and work toward constructive and realistic solutions. The success of our journey to tomorrow begins with the choices we make today.

Conclusion

I realize I have thrown down quite the gauntlet here, but just like those Olympic athletes who will soon journey to Vancouver, Canadians have always thrived on a challenge.

The road ahead won’t always be a smooth one. As this past year has taught us, we can expect some detours along the way. But with firm hands on the wheel and a reliable road map to guide us, I am confident we will reach our destination. 

Thank you.