Analysis: Suncor could face Syria hit, but long-term gain

Wed Aug 17, 2011 4:55pm EDT
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By Scott Haggett

CALGARY, Alberta (Reuters) - Fresh from a C$514 million writedown on its Libyan oil operations, Suncor Energy Inc could risk another big hit as turmoil sweeps through Syria - and that might not be a bad thing.

Suncor's C$1.2 billion Ebla gas project lies in central Syria and produces a small fraction of the company's total oil and gas output.

But it comes with a problematic partner: Syria's General Petroleum Corp, owned by a government condemned by much of the world for killing hundreds of its own citizens.

With the United States urging tougher sanctions on the government of Syrian President Bashar Assad, and protests and military reprisals continuing in the cities, Suncor might conceivably be forced to repeat what it did in Libya in February and walk away from its Syrian operations.

But a writedown would likely be smaller than the Libyan one, and the impact could be muted.

"Nobody is expecting any of the future growth or earnings for Suncor to come from Syria, nor Libya," said Lanny Pendill, an analyst with Edward Jones. "This is an oil sands powerhouse. If they're forced back to an oil sands focus, I'm happy about that."

Syria is an outlier for Calgary-based Suncor, which has tied its future to increasing output from its oil sands properties in northern Alberta. It plans to boost production from the region by 10 percent a year for the next decade, bringing output to a million barrels a day, about what Indonesia now produces.

"Most investors look at (Syria) as a distraction," said Andrew Potter, an analyst with CIBC World Markets. "But I think Suncor looks at it as a pretty respectable bit of business. But either way it doesn't figure much in their growth plans. Most of the reinvestment and most of the growth is slated to come from the oil sands."   Continued...

<p>A worker walks in the Ebla natural gas plant near Homs, northeast of Damascus, April 22, 2010. Suncor Energy Inc, Canada's No. 1 oil and gas producer has begun producing natural gas from the C$1.2 billion ($1.2 billion) Ebla project in Syria. The plant will produce 2.3 million cubic metres per day (mcm/d), the head of the Syrian operation Jon Ferrier told Reuters. Suncor, which took over management of the development when it acquired Petro-Canada last year, said in a release it is now selling gas into the Syrian market after its operations were approved by the Syrian government. REUTERS/Khaled al-Hariri</p>