September 15, 2009 / 3:48 PM / in 9 years

UPDATE 2-Suncor plans cuts, asset sales in gas business

* Says has not been happy with returns in natural gas

* Will pick assets to sell in coming months

* Sees no need to buy more refineries

* Shares rise 1.7 pct (Adds detail and comment)

By Scott Haggett

TORONTO, Sept 15 (Reuters) - Suncor Energy Inc (SU.TO) is planning deep cuts to its natural gas business, including asset sales, as it pares down its extensive operations following the company’s C$22.7 billion ($21 billion) takeover of Petro-Canada, an executive said on Tuesday.

Suncor, which became Canada’s largest energy company after the deal, has not been pleased with the returns in either its gas business or Petro-Canada’s, Vice-President John Rogers told an investor conference in Toronto.

“We are going through a significant reduction in terms of the number of properties and the amount of production that’s coming out of the natural gas division,” Rogers said.

Word of the cuts comes a week after Suncor said it was scrapping plans for a C$1 billion heavy oil processing unit at its Montreal refinery, a project Petro-Canada had devised long before the deal.

Suncor said earlier this month it will cut about 1,000 jobs, or 8 percent of its workforce, as it folds Petro-Canada’s operations in Canada, the North Sea and elsewhere into its business.

The company has a target price in mind for gas assets and will identify specific properties to jettison in the coming months. It will put the properties on the block “when the time is right”, Rogers said.

Gas markets have been depressed as the recession and mild weather cut into demand for the fuel, prompting record volumes to be injected into storage facilities. Some producers have shut off production in hopes that reduced supply will lift prices.

“It’s probably not a good time to sell gas assets but they are giving themselves until the end of 2010,” said Phil Skolnick, an analyst at Genuity Capital Markets. “Anything could happen (to gas prices) between now and then.”

Rogers said Suncor will likely spend less of its budget on gas than both companies combined had done in the past.

The aim is to structure the gas business as Suncor did before the takeover — as a natural hedge to the gas used to produce oil sands-derived crude, he said.

The company will consider joint ventures with producers that have expertise in shale gas, however, Rogers said.

Meanwhile, Suncor has no need to acquire more refineries following the merger, he said. It runs plants in Quebec, Ontario, Alberta and Colorado.

“We think we are in a good position in our downstream and we are not searching for any more refineries,” he said. “We have enough within our portfolio today.”

Shares in Suncor were up 63 Canadian cents, or 1.7 percent, at C$37.98 on the Toronto Stock Exchange on Tuesday afternoon.

$1=$1.08 Canadian Additional reporting by Jeffrey Jones; editing by Peter Galloway

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