Suncor Puts Production Expansion On Hold Over Pipeline Uncertainty

Suncor will put any production expansion approval plans on hold, the company's chief executive said, until it sees "physical progress" on new pipeline projects, Global News reports.

Speaking at a Barclays investor conference, Steve Williams noted that Canada's largest oil producer is not facing any immediate challenges related to the growing pipeline shortage in the country, but next year and in 2020 it will not approve any production expansion projects unless it sees signs that there will be new pipelines coming at some point in the future.

The comments come a week after the Federal Court of Appeal ruled against the federal government's approval of the Trans Mountain pipeline expansion, saying that the National Energy Board's review of the project was fraught with flaws that made it unsuitable as a basis for the government's approval. The main problem: the NEB's exclusion of the impact that the project would have on maritime transport.

Also recently, the future of Keystone XL that should increase the flow of Canadian oil to U.S. refineries, was marred by a federal judge's order for the State Department to conduct a more detailed review of the proposed route of the pipeline.

With both projects thus delayed and their future remaining uncertain, Suncor's move was only to be expected. Still, Williams said that although he found these pipeline developments "troubling" as a Canadian, they were not relevant for Suncor's future in the next three to five years.

In fact, this year the company plans to expand its production at Fort Hills by 10 percent and by another 10 percent in 2019. With pipelines in Canada operating at capacity due to growing production, this increase will probably be shipped by rail: oil-by-rail demand could rise by as much as 200 percent by the mid-2020, a Scotiabank commodity analyst recently predicted, if no new pipelines are built.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• Shale Won't Trigger The Next Financial Crisis
• Is This The Riskiest Oil Frontier In The World?
• Are Oil & Gas Executives Paid Based On Luck?