Syncrude Canada Ltd. 2004 Sustainability Report
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Financial & Economic Performance Syncrude uses natural gas to produce hydrogen, which is a key ingredient in our highly upgraded Syncrude Sweet Blend product. Shown here is the hydrogen plant at our Mildred Lake Upgrader.

Financial Performance

Dollar amounts in Cdn dollars 2004 2003 2002 2001
Total SSB Production 1
(millions of barrels)		 87.2 77.3 83.8 81.4
Pro-Forma Revenue for Syncrude Sweet Blend*
Millions of dollars 2 4,566 3,310 3,393 3,211
Annual Average Deemed Unit Price per barrel Cdn at Plant Gate 52.36 42.82 40.50 39.43
Annual Average WTI at Cushing (per barrel U.S.) 41.47 30.99 26.15 25.90
Total Operating Costs
Millions of dollars 1,623 1,629 1,429 1,480
Per barrel of SSB 18.61 21.07 17.05 18.17
Operating Cash Flow* 3
Millions of dollars 2,897 1,648 1,930 1,489
Netback per barrel of SSB 33.23 21.32 23.04 18.29
Capital Program 4
Millions of dollars 2,749 2,553 1,946 910
Net Cash Flow (Outflow) (before tax)* 5
Millions of dollars 148 (905) (16) 579
Return on Capital Employed (ROCE) (after tax)*
Total capital (%) 6 20.1 14.8 25.6 25.7
* Pro-forma data.
1 SSB Production is Syncrude Sweet Blend shipped.
2 Pro-forma revenue is SSB shipments multiplied by the Deemed Unit Price (Cdn) at the Plant Gate.
3 Operating cash flow is owners’ revenue less royalties (owner’s average) and total operating costs; owners’ financing costs and income taxes, and changes in non-cash working capital are not included.
4 Capital program expenditures include sustaining capital, growth capital and related development expenses.
5 Net cash flow is operating cash flow less capital program expenditures.
6 ROCE is the after tax return on average capital employed. ROCE - total capital - includes the investment in all assets, including assets not currently in service, in average capital employed.

Pro-Forma Revenue

Owners’ pro-forma revenue generated from the sale of Syncrude Sweet Blend crude oil, and based on Deemed Unit Prices, reached an all-time high of $4,566 million compared with $3,310 million in 2003. The revenue resulted from higher SSB shipments and higher crude oil prices, partially offset by a stronger Canadian dollar.

2004 experienced surging worldwide demand for commodities driven by global economic growth. West Texas Intermediate (WTI) prices rose from a monthly average low of $34.22 U.S. per barrel in January to a high of $53.09 U.S. during October. The average WTI price in 2004 was $41.47 U.S. per barrel, up from $30.99 U.S. in 2003.

Deemed unit prices for Syncrude Sweet Blend averaged $52.36 Cdn per barrel at the plant gate, up $9.54 per barrel from 2003. During 2004 Syncrude Sweet Blend traded at an average premium of $0.52 per barrel over Canadian Sweet Crude at Edmonton, which is comparable to 2003. The Canadian dollar continued to appreciate in 2004, averaging $0.77 U.S. per Canadian dollar, seven per cent higher than in 2003.

Total Operating Costs

Total operating costs were $1,623 million in 2004, down slightly from 2003. Operating costs were held steady despite a 12.8 per cent increase in SSB production. The small decrease in total operating costs was attributable to lower overburden removal and turnaround and catalyst costs, partially offset by higher production, purchased energy and other costs. Record production volumes reduced unit costs to $18.61 per barrel from $21.07 per barrel in 2003. Continuous improvement initiatives, with a focus on achieving higher production volumes through improved plant reliability, reduced energy consumption and lower operating costs also contributed to these improved results.

Purchased energy costs dropped in 2004 by $0.20 to $4.24 per barrel of SSB. Reduced consumption of imported natural gas saved $0.34 per barrel, while the effect of lower power exports increased costs by $0.14 per barrel.

Imported natural gas consumption declined to 0.58 gigajoule per barrel SSB in 2004 from 0.72 gigajoule per barrel SSB in 2003, and was achieved without a reduction in product quality. Imported natural gas costs averaged $6.28 per gigajoule, the same as in 2003. Overall energy consumption, in the form of imported natural gas, net power imports, coke and fuel gas by-products, declined slightly in 2004 to 1.35 Mbtu/Bbl SSB from 1.37 Mbtu/Bbl SSB in 2003.

Major components of Syncrude’s operating costs and capital expenditures are set out in the tables on the Joing Venture Operating Costs, Production and Unit Operating Costs, and Capital pages of this website.

Kyoto Protocol

Syncrude’s emission limits under the Kyoto Protocol, and the Canadian government’s regulatory framework governing Canada’s compliance with the Protocol, remain to be determined. Canadian Oil Sands Trust estimates the cost of compliance could be as much as $0.20 to $0.30 per barrel, depending on final calculation methods and large final emitter targets established by the government for the initial compliance period. Compliance costs are unknown beyond the initial compliance period as international negotiations on targets have not effectively begun.

Chart: Pro-forma Revenue for SSB

Secure Natural Gas Supply

In September, Syncrude and TransCanada officially opened a new gas metering station that will function as the local delivery point for natural gas to Syncrude. The move to establish a local delivery point ensures a reliable natural gas supply to Syncrude to meet existing and future needs. It will also result in reduced natural gas transportation charges and other related costs.