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Suncor to spend C$1.4B on oil sands co-generation plant

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Suncor to spend C$1.4B on oil sands co-generation plant

Suncor Energy Inc. will spend C$1.4 billion to build an 800-MW natural gas-fueled co-generation plant that will produce power for the Alberta grid and replace coke-fired steam generation units at an oil sands facility.

The switch to gas will pare greenhouse gas output from the boilers at the company's Base Plant near Fort McMurray, Alberta, by as much as 25%, Suncor said in a Sept. 9 statement. The conversion will also reduce the volume of water that the Calgary, Alberta-based Suncor draws from the Athabasca River by 20% after a flue gas desulfurization unit is taken out of commission. Burning gas instead of petroleum coke, a byproduct of oil processing, means the scrubber is no longer needed, and sulfur dioxide and nitrogen oxide emissions will drop by 45% and 15% respectively. The new facility is forecast to be in operation in the second half of 2023.

Suncor plans to burn natural gas to generate the steam it uses in extracting oil sands bitumen and processing the tar-like substance into refinery-ready crude. Excess steam from the plant will spin electricity-generating turbines that will allow the company to sell power back into Alberta's grid. The company said power sales will "substantially contribute" to its goal of C$2 billion in increased free funds flow, a key metric for integrated oil companies, by 2023. It did not specify how much profit the co-generation facility will provide.

"This is a great example of how Suncor deploys capital in projects that are economically robust, sustainability minded and technologically progressive," Suncor CEO, President and Director Mark Little said in the statement. "This project generates economic value for Suncor shareholders and provides baseload, low-carbon power equivalent to displacing 550,000 cars from the road, approximately 15% of vehicles currently in the province of Alberta."

Suncor is the world's largest oil sands producer, with large plants in the Fort McMurray region and a majority stake in the nearby Syncrude Canada Ltd. consortium. Canada's oil sands operators have been criticized by environmental groups for the environmental impact of their production methods. The conversion will allow Suncor to take advantage of persistently low natural gas prices at Alberta's benchmark AECO hub, which had averaged C$1.63/MMBtu year-to-date as of Sept. 6, according to data compiled by the Petroleum Services Association of Canada.

Suncor owns about 59% of the Syncrude consortium, while Imperial Oil Ltd., one of Exxon Mobil Corp.'s Canadian subsidiaries, owns 25% and operates the facility. China-based Sinopec and CNOOC hold the rest.