CERA Week Upstream Plenary
President and CEO
Suncor Energy Inc.
February 23, 2016
Check against delivery
Steve Williams, President and CEO
Thanks Atul. It’s great to be part of this discussion – especially with such esteemed colleagues.
There’s no doubt we’re having different conversations here at CERA Week. We live in an interconnected world - one that’s fast-paced and changing by the minute.
More than ever, we need to share our insights and observations on how to best navigate the future. This conference – and panel discussions like this one – provide us with a valuable opportunity to do just that.
Before I begin, just a brief commercial about Suncor to give you some context:
- We’re Canada’s largest integrated energy company and the fifth largest in North America. We’re focused on development of Canada’s oil sands through mining and in situ technologies, as well as E&P operations off the east coast of Canada and in the North Sea.
- We have a strong midstream business which links our upstream production with our four refineries. We also have a renewable energy portfolio. We’re the leading branded retail marketer in Canada, with more than 1,400 Petro-Canada service stations across the country.
I’m looking forward to the Q and A that follows, so I’ll keep my remarks short, briefly touching on four areas:
- first, the impact of the low oil price environment and what it means to oil sands development
- then, the implications of climate change discussions for our industry
- third, a subject on everyone’s minds – market access
- and finally, the role technology and innovation will play going forward.
Low price environment and implications for Canada’s oil sands
Today’s headlines highlight more than the fall in oil prices. The story is about the magnitude and speed of the drop. And, the difficulty of predicting when or how they’ll recover.
With WTI oil prices hovering in the $20 to $30 per barrel range in the last couple of weeks, we see this as a material issue - an issue with international implications.
Canada’s oil sands industry, like others, is feeling the effects of lower prices. Not surprisingly, there are a number of players having to make very tough decisions in today’s climate.
Integrated companies, like Suncor are better positioned to weather the storm, but many have seen an erosion of their cash flow, severely limiting their ability to advance projects.
That, in turn, is negatively affecting the engineering and construction sectors. A very real and troubling impact of low oil prices includes reduced employment within our companies and throughout the supply chain, including transportation, manufacturing and high tech.
There is some room for optimism, however. While we certainly haven’t welcomed the lower for longer prices, we at Suncor see this period more as an opportunity than a threat. Our goal is to use this time to build an even stronger company – a competitively advantaged company that is poised to benefit significantly when oil prices recover.
We’ve maintained a laser-like focus on operational excellence initiatives. This has helped us drive costs out of the system and increase production and reliability. Our efforts are paying off. By steadily improving reliability across our operations, we’ve successfully increased overall production by eight percent year over year.
We’ve reduced operating costs by almost $1 billion in the same period. And, we’ve scaled back capital spending by over $1 billion versus our original guidance. We’ve accomplished this while still executing critical maintenance and advancing key growth projects - projects like Hebron, an Eastern Canada off-shore project, and Fort Hills, our joint-venture mining project in Northern Alberta.
Our success depends heavily on prudently managing costs and leveraging our operating model. We firmly believe that companies doing this are better equipped to maintain or improve their competitive position.
Climate change and public policy implications for industry
Another top-of-mind issue is climate change – especially in light of recent discussions in Paris. It’s one of society’s biggest challenges and we believe everyone has a role to play to help get to realistic and meaningful solutions.
At Suncor, we see carbon price signals and a practical regulatory architecture as important tools to move forward. Properly designed, they can:
- drive real greenhouse gas reductions
- support game-changing technologies
- position our industry as a leader in energy innovation
- and maintain the competitiveness of our economy
Some of you may have heard about the climate plan announced by Alberta Premier Notley late last year. We believe the plan has tangibly demonstrated that leaders in the environmental community and the oil sands industry can work together:
- to problem-solve complex issues
- to find solutions to ensure environmental and economic competitiveness
- and, demonstrate that Alberta is a climate leader among major oil producing jurisdictions.
The plan puts a price on carbon and sets an emissions limit for the oil sands. Importantly, the plan sets out an ambition:
- to bend the emissions curve over time
- to advance technology
- and, to ensure we receive full value for our resource.
It also sends a signal that we’re serious about reducing greenhouse gas emissions. It will change the way we talk about climate change, resource development and infrastructure.
Getting resources to market remains a top priority for all of us as we work to operate and grow. At Suncor, we have a strong mid-stream group which helps us leverage our integrated model, linking our upstream with the downstream.
We’re guided by a strong belief that oil sands can make a positive contribution in meeting global energy needs. That’s why we’re active in supporting all Canadian pipeline projects, including Energy East, Northern Gateway and the TransMountain expansion, among others.
We do know, however, that development of pipeline infrastructure is getting more complicated. And unfortunately, the public debate seems to be getting more and more polarized. The key as we move forward is to ensure pipeline development, and rail and marine transportation are undertaken responsibly, safely and sustainably.
And in order to make progress, we need to work collaboratively with a wide range of stakeholders on project approvals. We need to demonstrate our own commitment to improved environmental performance. We need to highlight how infrastructure projects will adhere to the highest operational and environmental performance standards, all while helping to drive our economy.
It’s time for a new conversation about pipelines and we look forward to being part of it.
The path forward: collaboration, innovation and technology
Achieving market access and the journey that led to Alberta’s new climate plan remind us of the importance our stakeholders place on environmental performance. We have made progress, including reducing the GHG emissions intensity of our operations, more work remains.
We believe the path forward lies in collaboration, innovation and technology. And it’s alive and well in the Canadian oil sands industry.
At Suncor, we spend approximately $200 million annually to support research and technology. That includes investments in cogeneration and lower energy intensity in situ technologies, such as electro-magnetic and solvent-based extraction.
We’re proud to be working with others in progressing technology. A prime example is Canada’s Oil Sands Innovation Alliance, or COSIA, which is an alliance of 13 companies representing 90 percent of oil sands production.
COSIA allows participating companies to share technologies and innovations focused on environmental performance improvements. To date, over 800 technologies worth nearly $1.3 billion have been shared.
COSIA is focused on four environmental priority areas: GHGs, water, land and tailings. The GHG group is focused on increasing energy efficiency, recovering waste heat, measurement, reporting and verification. They’re also exploring regional opportunities to reduce emissions with non-industry partners.
Exciting stuff - and more to come.
Responding to low oil price environment, addressing climate change and achieving market access are big tasks that certainly loom large. Yet citizens around the world are looking for us to take action.
We may not have all the answers but let’s not be afraid to start. That means developing, implementing, and yes, maybe even testing solutions to achieve the energy future we all want.
In environmental terms, it means energy that is as clean and sustainable as we can get. In financial terms, it means energy that is affordable, innovative and creates jobs and fuels the economy. In social terms, it means energy that helps build healthy communities. We must realize they are all linked. We can’t do one without the other.
Navigating today’s environment will require collaboration and hard work. I’m confident, however, that – together - we’re up for the challenge.