CALGARY - The head of Suncor Energy Inc. is downplaying two concerns that have hung over oilsands producers recently: rising costs and delays for projects that would bring Alberta crude to new markets.
Chief executive officer Rick George said Wednesday he doesn't expect the cost of its Fort Hills oilsands mine to be nearly as high as a project that competitor Imperial Oil Ltd. (TSX:IMO) is building.
George also said oilsands producers shouldn't have problems getting their crude to market because there are plenty of pipeline proposals on the table besides the controversial projects to the U.S. Gulf Coast and West Coast.
"Usually when the market's worried bout something, it's not the right thing to worry about. It's usually something else that gets you," George, who retires in May, said on a conference call to discuss Suncor's fourth-quarter results.
He made his remarks after Canada's largest energy company (TSX:SU) reported a nearly 11 per cent increase in fourth-quarter net earnings, and said production is starting to resume in Libya following a bloody civil war.
Suncor's board of directors expects to make a decision on whether to go ahead with Fort Hills in 2013, but George said it's too soon to know what the pricetag will be.
He did say, however, that the numbers for Imperial's Kearl oilsands mine seem "way out of range."
"I would just say that our current estimates are significantly below those," George said.
In December, Imperial's (TSX:IMO) board approved an $8.9-billion expansion to an initial $10.9-billion phase at Kearl that's expected to start up late this year.
When Imperial's board of directors approved the project in the spring of 2009, it expected costs to be around $5 per barrel. They have since risen to $6.20 per barrel.
Suncor is the operator of Fort Hills with a 60 per cent stake. Total E&P Canada and Teck Resources Ltd. (TSX:TCK.B) evenly split the rest.
Fort Hills was shelved in late 2008 by then-operator Petro-Canada when costs spiralled out of control and the global credit crisis and recession began to take hold.
Chief operating officer Steve Williams, who will become CEO when George retires, said Suncor's $1.75-billion joint venture with the Canadian arm of the French energy giant Total and has helped "a ton" on the cost front.
Although labour is still an issue, George said he doesn't see costs of equipment such as valves and compressors rising at nearly the same rate as those things did in the 2005 to 2008 boom.
Also Wednesday, George said delays in building new oil pipelines out of Alberta won't be a cause of concern for about four or five years.
"There's plenty of Plan Bs on the table," George said. "I actually don't see crude getting backed up into Alberta."
Oil pipeline proposals have attracted vehement opposition from environmental groups. Regulatory reviews on projects connecting Alberta crude to both the U.S. Gulf Coast and Canada's West Coast have been dragged out amid the controversy.
George said the industry is looking at other options, citing two Enbridge Inc. (TSX:ENB) proposals to modify existing pipelines, rather than building new ones from scratch. One would reverse the Seaway pipeline, bringing crude from Cushing, Okla. to Gulf Coast refineries. Another would see part of Line 9 through Ontario reversed to bring Western Canadian crude eastward, though a review of that project is taking longer than expected, too.
Last month, the U.S. government rejected TransCanada Corp.'s (TSX:TRP) Keystone XL proposal, but left the door open for the pipeline company to apply for a new permit to build a pipeline that would carry Alberta crude to the Gulf region.
U.S. President Barack Obama said a deadline imposed on his administration by the Republicans to make a decision by Feb. 21 didn't allow enough time to adequately study a new route through Nebraska, so he had no choice but to reject the project.
At the same time, a hearings on Enbridge's Northern Gateway pipeline to the northwestern B.C. port of Kitimat are underway. With thousands of people registered to speak before the panel, the process will likely take about a year longer than originally expected.
Late Tuesday, Suncor posted $1.43 billion of net income during the last three months of 2011, compared to $1.29 billion a year earlier thanks to higher oil prices. Revenue rose to $10.1 billion from $9.3 billion a year earlier.
Suncor's Libyan joint-venture partner has resumed production from three of five fields in the North African country as political stability gradually returns following the overthrow of Moammar Gadhafi.
Production was about 25,000 barrels per day in the fourth quarter, and has since risen to about 35,000 barrels, said Williams.
"We're taking a cautious approach to reestablishing operations and have only a handful of employees on the ground at the present time," Williams said.
Suncor shares fell eight cents to $34.46 in Wednesday afternoon trading on the Toronto Stock Exchange.