LETTER FROM SYNCRUDE’S LEADERS
A year of change, achievement and focus on the issues.
In business, as in most other aspects of life, change is inevitable. Issues come and go. Technologies evolve. Processes and people and leadership are refreshed and renewed. And, if the business learns and gains wisdom from its experiences, it grows and prospers.
Among the changes at Syncrude in 2007 was the implementation of a management services agreement struck in late 2006 with Imperial Oil Resources. An Opportunities Assessment Team was comprised of representatives from Imperial, ExxonMobil, Syncrude and some other owners. In 2007, pursuant to this team’s recommendations, Syncrude embarked on a new path to strengthen its position as a leader in the oil sands industry. This included the introduction of a new management team. As well, five key operating philosophies were introduced across the site:
- People: Our employees are major stakeholders in Syncrude’s success and every person will be given the tools and resources they need to contribute and make a difference.
- Safety: Safety is a core value and will be considered in every decision we make.
- Reliability: Reliability is essential to safety, regulatory compliance, the satisfaction of Syncrude’s owners, economic viability, and our reputation.
- Margin: We must endeavour to make the highest value products at all times.
- Cost: We must direct our expenditures towards items that are required to sustain or grow the business in an environmentally and socially responsible manner.
While the new organizational structure and its accompanying operating philosophies are still taking hold, performance in 2007 was generally reflective of the impressive results we seek.
For example, Syncrude set six new production records during the year, one of which was the production of 111.3 million barrels of Syncrude crude oil, an increase of 17 million barrels, or 18 percent, over 2006.
Production averaged about 305,000 barrels a day, and we are working towards achieving productive capacity of about 350,000 barrels a day of high quality crude oil.
While not completely unexpected in this first full year of operation since the completion of a major expansion to our Mildred Lake upgrader, the capacity losses we experienced can be traced to learning curve challenges associated with new equipment and processes. Renewed effort will be placed on reliability targets as we move ahead.
Progress was also made producing a higher quality synthetic crude oil, a new and cleaner-burning oil product which we expect to be in high demand by refineries. We began producing this new product in the third quarter.
As always, our progress—and, indeed, much of the progress of the oil sands industry as a whole—hinges significantly on what we can do with science and technology, both at the mine face and in the plant. In fact, Syncrude was ranked Canada’s 35th largest corporate research and development spender in 2006.
Of many technologies in development, particular focus was given to research and testing of a new technology called In-Pit Bitumen Production, or In-bit. In-bit starts the process of preparing bitumen slurry closer to the mine face and it allows for more extensive use of hydrotransport, which was a key enabling technology introduced some years ago. This technology may also reduce emissions such as greenhouse gases and oxides of nitrogen. A prototype of the In-bit system was constructed in 2006 and was supplying bitumen for production by summer of 2007. Research continues and future applications are being considered.
Syncrude’s continued focus on safety resulted in improved performance in all main categories in 2007 compared to 2006. The lost-time injury frequency rate for both Syncrude employees and contractors declined, for example, by more than 60 percent to 0.05 per hundred person years worked. Total recordable injury frequency was 0.70 per hundred person years worked.
Syncrude is also generating significant economic benefit from our oil sands development. Since start-up in 1978, participants in the Syncrude Joint Venture have made payments in excess of $9 billion to governments for royalties, payroll and municipal taxes, and other Crown charges. Of a total economic contribution of nearly $4.9 billion in 2007, about $2.1 billion was allocated to the purchase of goods and services from a variety of locations and enterprises, the vast majority from within Canada.
The strategic management of hange breeds the kinds of performance improvements and achievements that Syncrude posted in 2007, and opens the door for future growth. But change should not occur without consideration given to history, experience, and an accounting of what works and what matters.
Clearly, what matters most to stakeholders inside and beyond the Syncrude organization is our journey toward sustainability, the value of which is clear. As one example, sustainability lends an appealing security to the economic futures of people, as lives can be planned around long-term employment opportunities. As another, Syncrude’s sustainability commitment also helps assure communities that they will participate in shaping our plans for growth, be consulted on matters of potential concern, and will share in the wealth that they help to create. For future generations, sustainability means they will benefit from the actions we take today to lessen our environmental footprint while providing energy to sustain quality of life.
Aboriginal communities have long been key participants in the development of our business plans and as stakeholders in the continued health and sustainability of the Wood Buffalo region. Of our total workforce of around 4,700 people, 415 or 8.5 percent are of self-declared Aboriginal descent. Another important metric is the more than $143 million spent by Syncrude in 2007 on 29 active contracts with local Aboriginal firms. This is the fourth straight year Syncrude has purchased more than $100 million in goods and services from the local Aboriginal business community. In total, Syncrude has spent a cumulative $1.1 billion with companies owned by First Nations and Métis people and communities since we began tracking this data in 1992.
The Fort McKay Elders Advisory Committee is one among many groups upon which Syncrude relies for guidance on our sustainability journey. We draw on this group for the experience and wisdom that Aboriginal Elders can provide in such areas as reclamation. Toward this, the committee in 2007 reconvened reclamation technical meetings focused on reviews and discussions of a variety of land preservation and related issues.
Syncrude is extensively engaged in providing support for the community-at-large as well. During the year, we invested $4.2 million in a variety of projects that will benefit people in the Wood Buffalo region. These projects include the Fort McMurray YMCA Sport and Cultural Enrichment preschool program, Keyano College’s Emergency Medical Technician program, and the Science Alberta Foundation’s Science-in-a-Crate classroom learning tool, to which Aboriginal schools in Wood Buffalo will get priority access.
In terms of sustaining the environment, Syncrude spent nearly $29 million in 2007 on land reclamation activities and leads the industry in land reclamation. The company has now reclaimed over 4,500 hectares of land and planted close to five million trees and shrubs. Importantly, early in 2008, we were pleased to be the first oil sands operator to receive government certification for a parcel of reclaimed land.
Syncrude participates with other oil sands companies in a detailed operational water management agreement that limits water withdrawals from the Athabasca River during low flow periods. Companies use their own initiative to achieve targets and also work together on joint programs and initiatives to improve the management and efficiency of water use. Syncrude remains the most efficient user of water in the oil sands industry and, last year, reduced by 10 percent our water use per barrel of production.
Relating to atmospheric emissions, Syncrude continued construction on a major project that should substantially reduce total emissions of sulphur dioxide and particulate matter when it is operating to specification around 2011. Meanwhile, we are pleased to report that SO2 emissions intensity in 2007 was reduced by more than 10 percent from the previous year. As well, flaring was reduced by 50 percent.
According to the calculation method established for the Alberta government’s Specified Gas Emitters Regulation, greenhouse gas emissions intensity was reduced by about 11 percent as compared to the average of our per barrel GHG emissions between 2003 and 2005. Syncrude aims to continue this trend by implementing the Global Energy Management System, which is an ExxonMobil best practice.
Although total emissions of greenhouse gases from Syncrude continued to rise in 2007, we are working to reverse this trend. Toward that goal, Syncrude is an active member of the Integrated CO2 Network, or ICON, which is exploring the viability of a large-scale Canadian carbon dioxide capture, transportation, and storage network. A successful sequestration system is believed by many to be a key technology for reducing carbon dioxide emissions and features prominently in government policies to achieve greenhouse gas emissions reduction targets.
In 2008, Syncrude will celebrate its 30th anniversary as a producing entity. Throughout these years, thousands of people have contributed in many ways to our success, and many improvements to the way in which we operate have been successfully introduced. Yet, for all that we have achieved, much more remains to be done to ensure stakeholders view Syncrude as a responsible steward of Alberta’s oil sands resource.
To help facilitate dialogue with Canadians about oil sands development, Syncrude has joined with other developers to launch an interactive website—www.canadasoilsands.ca. Through this effort, we hope to draw input and suggestions for improvement from all interested people and environmental groups and also respond to concerns.
We recognize the issues at hand, we are responding to them with all of our resources, and we look forward to reporting once again on the progress we achieve in 2008.
MARCEL COUTU |
TOM KATINAS |
