- 2006 Business Results
- Joint Venture Operating Costs
- Stage 3 Project Complete
- 2006 Operational Highlights
- Research and Development
- 2007 Outlook
Natural Gas adds value
While Syncrude’s use of purchased energy—mostly natural gas—comprises a significant portion of our total expenditures, it also adds value to our signature Syncrude Sweet Blend product. About 60 per cent of all natural gas consumed is used as feedstock to produce hydrogen, which is then added to Syncrude Sweet Blend to improve its quality. Natural gas is also used to produce electrical power through co-generation (20%) and as supplementary fuel in our production process (20%).
Joint Venture Operating Costs
Total operating costs were $2,494 million in 2006, up from $2,077 million in 2005. Total operating costs before the inclusion of energy costs rose 26 per cent, as fixed costs related to Stage 3 infrastructure and workforce were in place for most of the year, ahead of the Stage 3 production volume increase.
Total purchased energy costs, comprising imported natural gas, purchased diesel and net power imports, increased four per cent. Imported natural gas volumes rose 40 per cent to meet hydrogen demand from the new hydrotreaters and to support higher bitumen production at Aurora. The cost effect of the higher natural gas volumes was partially offset by a 25 per cent decline in natural gas prices to $6.26 per gigajoule.
Growth/Major project capital expenditures decreased significantly in 2006 with completion of the Stage 3 and South West Quadrant Replacement projects early in the year. New spending focused on the Syncrude Emissions Reduction Project (“SERP”), which when combined with Stage 3 improvements, should reduce total emissions of sulphur dioxide by 60 per cent and particulate emissions by at least 50 per cent from 2005 levels when fully operational in 2011. Project expenditures are expected to total approximately $772 million. (Read more about this project).
Capital spending to support base plant operations increased in 2006, primarily due to the replacement of certain extraction equipment and mining mobile equipment related to sustainment of production and replacement life cycle timing.
Development expense supporting capital projects decreased when compared to 2005 with the completion of the Stage 3 expansion. This reduction was partially offset by higher base plant development expenses.
Management Services Agreement Signed –
In November, Syncrude signed a management services agreement with Imperial Oil Resources. It will provide Syncrude with operational, technical and business management services that will allow Syncrude to adopt global best practices from Imperial and its majority owner, ExxonMobil, in such areas as maintenance and reliability, energy management, procurement, safety, health, and environmental performance. The agreement aims to capture improved performance and profitability from the Syncrude operation by combining the skills and experience of Syncrude employees with the best practices and resources of a global leader in refining. Syncrude has a long history of successful collaboration with both organizations. During the first quarter of 2007, a team of representatives from all three organizations as well as other Joint Venture participants will work to identify, quantify and prioritize opportunities for review and consideration by the Syncrude Management Committee.