November 23, 2011 / 9:15 PM / 6 years ago

Imperial Oil sees no Syncrude expansion before 2020

CALGARY, Alberta (Reuters) - Imperial Oil Ltd does not expect to expand production capacity at the Syncrude Canada oil sands project in northern Alberta at least until 2020, breaking from the expectations of the other partners in one of the oil sands' biggest operations.

Imperial is concentrating on improving reliability at the sprawling oil sands mining and synthetic crude processing development before moving forward with multibillion-dollar plans to boost output beyond the current capacity of 350,000 barrels a day, spokesman Pius Rolheiser said.

Imperial has a 25 percent stake in Syncrude, making it the second-largest interest holder. Imperial's parent company, Exxon Mobil Corp, has managed the project since 2007.

"It would be premature of me to talk about specific project plans or timing or sequencing. However, Imperial is of the view that expansion will likely not happen before the end of this decade," Rolheiser said.

The view differs from that of Canadian Oil Sands Ltd, the largest Syncrude owner with a 37 percent stake. In its current investor presentation, being shown to investors in Asia this week, it says it expects to increase capacity by 71 percent to 600,000 barrels a day by 2020.

Canadian Oil Sands says the expansion would start with a 50,000 barrel a day increase through "debottlenecking" equipment currently in use.

Imperial's position also goes against the flow of most oil sands developers, which have captured and held investor interest in the face of rising costs, volatile oil prices and environmental opposition with the promise of production gains at regular intervals.

Syncrude partners brought in Exxon Mobil four years ago to improve operations following a string of unplanned equipment outages that drove up per-barrel operating costs and chewed into production forecasts.

Even now, two processing units at the upgrading plant are offline, including a 100,000 barrel a day coking unit that suffered a disruption on Tuesday. There is no word yet on when it might restart.

"We are committed to growth. We're committed to economic development of the entire resource base. But we believe that improved reliability of the base operation is the first priority," Rolheiser said.

Imperial and Exxon Mobil are also developing the C$10.9 billion ($10.4 billion) Kearl oil sands project, scheduled to start producing 110,000 bpd by the end of next year.

FirstEnergy Capital Corp analyst Michael Dunn said he has chopped his forecasts for capital spending by Canadian Oil Sands after gleaning from comments made by other partners that expansion plans, including opening a new mine called Aurora South, would be pushed back.

"Since major expansions require unanimous partner approval, we have reduced our capex estimates materially in the 2012 to 2015 time frame," Dunn said in a research note.

The cut in spending may actually be a positive for Canadian Oil Sands as it will mean less strain on its balance sheet and its ability to maintain dividends, he said.

Canadian Oil Sands' plans for production increases were agreed on by all of the joint-venture partners when they developed the last strategic plan, said Siren Fisekci, spokeswoman for the company, all of whose revenue is derived form Syncrude.

"What you're seeing there is Imperial putting out their own view," she said.

Shares in Canadian Oil Sands fell 12 Canadian cents to C$19.40 on the Toronto Stock Exchange, a smaller drop than that of the overall TSX energy group, which sank 3 percent. Imperial was off C$1.17, or 2.8 percent, at C$40.01.

Syncrude's other partners are Suncor Energy Inc, Nexen Inc, Sinopec Corp, Murphy Oil Corp and JX Holdings unit Mocal Energy.

($1=$1.05 Canadian)

Editing by Peter Galloway

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