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CALGARY – Suncor Energy Inc. says it will lease and operate a series of Aframax oil tankers to transport crude oil from the recently completed Trans Mountain pipeline expansion to Pacific markets.
By leasing and operating the tankers itself, Suncor saves on shipping costs, said Dave Oldreive, the company’s executive vice president in charge of refining, sales and marketing.
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“We are well-positioned to deliver volume to our customers, eliminate that middleman and capture the full value for Suncor,” Oldrieve said Wednesday in a conference call with analysts where executives discussed the company’s first-quarter financial results.
The expansion of the Trans Mountain pipeline, which runs from Alberta to the coast of British Columbia and officially opened last week, gives Canadian oil transporters access to an additional 590,000 barrels per day of pipeline capacity.
The expanded pipeline will “significantly increase” the profitability of Suncor’s oil sands production, Oldreive said, by reducing the discount that Canadian oil shippers have received in the past in part due to a lack of export capacity for their product.
It also enables future production growth for both Suncor and the oil sands sector as a whole, he added.
“We have been waiting for this for some time and are excited to begin delivering the pipeline. “This is good for our industry and good for Suncor,” Oldreive said.
According to the Canadian Energy Regulator, the Trans Mountain pipeline expansion is expected to increase total western Canadian crude oil export capacity by 13 percent once it is fully operational. (Although the pipeline is officially open, it is still filling with crude oil, and the first tanker is not expected to load the new line for export until mid-month.)
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According to the Canadian Energy Regulator, the total capacity of the Trans Mountain expansion will account for 17 percent of the total pipeline export capacity available to Canadian crude oil shippers.
Oldrieve said on Wednesday’s conference call that Suncor expects crude oil loaded onto tankers from the Trans Mountain pipeline at the Westridge Marine Terminal in Burnaby, B.C., will be delivered primarily to California and Asian markets.
He said Suncor’s commercial offices in Calgary, Houston and London, England, have been working to strengthen relationships with customers along the West Coast and in Asia to capitalize on the opening of the Trans Mountain project.
“We have a pretty sophisticated trading platform. And perhaps what makes us a little unique is that we don’t rely on third-party trading,” Oldrieve said.
“This allows us to capture the full value of the transaction by transacting directly with customers.”
Eighty percent of the Trans Mountain pipeline expansion’s capacity is tied to long-term contracts with crude oil shippers, with the remaining 20 percent available for spot deliveries on a monthly basis.
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Contracted oil transport companies, including Suncor, are currently in an ongoing dispute with Trans Mountain Corp. about the increasing tolls the Crown corporation plans to charge them for transporting their product through the pipeline.
The creation of Trans Mountain coincides with increased production by Western Canadian oil companies. In Alberta in particular, oil production reached a record 4.53 million barrels per day in December 2023, figures from the Canadian Energy Regulator show.
Suncor itself said in a press release after the market closed on Tuesday that the company earned $1.61 billion in the first three months of 2024, up from $2.05 billion a year earlier.
The company reported record upstream production of 835,000 barrels per day in the quarter, including record oil sands production of 785,000 barrels per day.
The company also said it achieved record refined product sales of 581,000 barrels per day and had its highest-ever refinery throughput in the first quarter of 455,000 barrels per day with overall refinery utilization of 98 percent.
Suncor has scheduled an investor presentation for May 21 that will provide an overview of the company’s progress in reducing its costs and increasing shareholder returns.
CEO Rich Kruger, who was brought in to lead the energy giant amid growing investor pressure to improve its safety record and operating performance, has now been at the helm for just over a year.
This report by The Canadian Press was first published May 8, 2024.
Companies in this story: (TSX:SU)
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