Operations and Economic Value

We aim to create sustained economic value from the oil sands resource. This is achieved through ongoing performance improvements and ensuring continued opportunities for stakeholders to share in the benefits of our operations.

Our Performance

Operations and Economic Value Graphic 2

Per barrel operating costs

12% lower than 2014.

90.6 million barrels

of crude oil shipped.

Operations and Economic Value Graphic 1
Operations and Economic Value Graphic 3

Total economic contribution

exceeds $5 billion.

Our Approach

Syncrude is committed to responsible development and management of the oil sands resource. Toward this, we aim to create sustained economic value for our stakeholders and all Canadians. This is achieved through an ongoing focus to improve safety, reliability and environmental performance; reduce operating costs; and ensure opportunity for all stakeholders to benefit from our operations. Indeed, we recognize we are measured on not just the crude oil we produce, but how well we do it.

Contributing to the Local and Canadian Economies

Syncrude contributed over $5.3 billion to the Canadian economy in 2015 – with over 30 per cent in the local Wood Buffalo region – through the procurement of goods and services, payment of taxes and royalties, and salaries.

At $3.3 billion, procurement comprised the largest portion of our expenditures. This included $199 million with Aboriginal businesses and $634 million with other businesses in the Wood Buffalo region – representing one quarter of our annual procurement. We spent over $1.8 billion with businesses elsewhere in Alberta and $588 million in the rest of Canada. Of our total annual procurement, 96 per cent was spent in Canada.

Economic contributions also included net payroll costs of $847 million, municipal taxes of $131 million, payroll and corporate taxes of $388 million, royalty payments of $351 million, and purchased energy costs of $318 million.

Over the last five years, Syncrude has generated a total economic impact of more than $36 billion.

Annual Economic Contributions

Geographic Distribution of Economic Contribution (2015)1

1 Includes all expenditures.

Cost Structure Reductions

More than $1.3 billion from Syncrude’s 2015 budget was saved through a concerted cost management effort that began in 2014. This helped us weather the sustained low oil price environment and was achieved without any employee lay-offs. Savings were achieved by finding efficiencies in operating, development and capital program areas, and through project deferrals. Our focus on safety, reliability and compliance with regulatory requirements was maintained.

Input to Alberta Royalty Review

The Government of Alberta concluded its review of the province’s energy resource royalty system with a February 2016 report that found Alberta’s royalties are comparable to similar jurisdictions and, therefore, competitive. Syncrude submitted our formal input to the review in late 2015.

In our submission, we noted that improved market access for energy products and an efficient and effective regulatory process enhance Alberta’s competitiveness and grow the benefits of responsible oil sands development.

Cumulative Royalty Payments

Major Projects and Future Development

Two major projects began operations in 2015. The first was the $3.8 billion Mildred Lake Mine Replacement Project which is on track to improve bitumen recovery rates and increase bitumen production through two new mine trains that incorporate new ore crushing technology. Second was the $1.9 billion Fluid Fine Tails Full-Scale Centrifuge Plant which dewaters fluid fine tailings and produces a clay-rich soil material that is being used in the reclamation of former mining areas.

Syncrude filed in late 2014 our regulatory application to develop a project known as the Mildred Lake Extension (MLX). The project is intended to sustain bitumen production levels from the North Mine when currently approved Mildred Lake mining areas are depleted; it is believed that it will be one of the lowest-cost developments in the oil sands. The application remains under review by the Alberta Energy Regulator and consultations continue with communities of interest. Further information can be found in the Aboriginal Relations and Stakeholder Relations chapters.

Development plans for the Aurora South leases have been deferred into the 2020s so we can instead focus on continuing efforts to improve efficiency and plant reliability in existing operations. This work should increase production and add near-term value.

Bitumen Recovery

Focus on Process Safety

The goals of our Operations Integrity Management System (OIMS) and Global Reliability System (GRS) are to address risks, increase reliability and achieve a workplace where “Nobody Gets Hurt.” It was disappointing when, in late August, a fire started from the release of hydrocarbons from a pipeline in our upgrader. There were no injuries, however, production from some units was suspended for nearly a month, as were crude oil shipments.

This serious incident led us to conduct a comprehensive investigation into the cause and also to dedicate significant resources to repairs that would enable the return to normal operations. We conducted engineering assessments on more than 60 piping lines throughout the upgrader to ensure the integrity of the operation and to support our ongoing effort to eliminate high potential incidents, and improve safety and reliability.

Research and Technology Development

Syncrude invested about $55 million in the development of new technologies and processes in 2015, and our commitment to research and development once again earned recognition as one of Canada’s Top 100 Innovation Leaders as determined by annual R&D spending.

While spending was lower than the prior five years, this was due to the completion of several significant R&D projects, such as the Fluid Fine Tailings Centrifuge demonstration.

Our R&D program focuses on improving the reliability, capacity and cost-effectiveness of our operation, and on projects that will improve environmental performance.

Syncrude received 15 patents during the year, bringing to 162 the total of Canadian patents awarded. They included patents for pump technology, bitumen separation and extraction methods, and tailings treatment technologies.

Syncrude environmental technologies related to tailings management, water use and reclamation are published and shared openly through technical journals, conferences and collaborative industry groups such as Canada’s Oil Sands Innovation Alliance (COSIA). We also collaborate with universities, government agencies, industrial research networks and consortia, private research organizations, and Syncrude Joint Venture Participants.

As a COSIA member, Syncrude has contributed over 290 technical reports. We also participate in the Tailings, Water, Land and Monitoring Environmental Priority Areas, and lead 40 Joint Industry Projects.

As a funder and provider of in-kind support, Syncrude is a key stakeholder in the following Natural Science and Engineering Research Council of Canada (NSERC) Industrial Research Chairs at universities across Canada:

University of Alberta

University of Saskatchewan

Western University

Updates on recent research activities are included throughout this report, in the Biodiversity, Land, Tailings Management and Water chapters.

Research and Development Expenditures

Improving Coker Reliability

Acting on a recommendation from an internal taskforce mandated to find ways to improve coker reliability, we have changed the maintenance strategy for our two original fluid cokers. The new approach is to “keep it clean” rather than allow coke build-up that can reduce coker throughput toward the end of planned run lengths. Coker reactor cyclone outlets are now cleaned every six months instead of only during end-of-run maintenance shutdowns. Our reliability goal is to achieve run lengths of 36 months between turnarounds on a coker unit.

Best Practices Extend Truck Tire Life

We achieved a new record for truck tire life in early 2015. The tire on a Caterpillar 797 haul truck was in service for 11,158 hours over 465 days and travelled more than 147,000 kilometres in the Aurora mine. The practices leading to the best-in-industry record included enhanced road maintenance and tire monitoring as well as improved truck operator education. At a cost of about $65,000 each, tires represent the single highest dollar value item in our truck budget; significant savings are expected from these ongoing efforts.

Performance Data

Operations1

2011 2012 2013 2014 2015
SSP produced (million barrels per year) 105.2 104.9 97.5 94.2 90.6
SSP produced (Mm3 per year) 16.70 16.70 15.50 14.98 14.40
SSP produced (thousand barrels per day) 288 286 267 258 248
Bitumen produced (million barrels per year) 125.2 121.2 117.8 111.9 109.0
Bitumen produced (Mm3 per year) 19.9 19.3 18.7 17.8 17.3
Bitumen recovery (%) 91.7 91.6 91.0 91.2 90.5
Upgrading yield (%) 85.7 86.3 85.3 84.9 85.0

Economic Value

2011 2012 2013 2014 2015
Operating costs2 ($ million) 4,344.40 4,428.70 4,379.80 4,845.90 4,117.30
Operating costs2 ($ per barrel of production) 41.28 42.24 44.94 51.55 45.43
Capital expenditures3 ($ million) 1477.4 2501.7 3232.7 2036.6 600.2
Research and development expenditures ($ million) 92.0 158.2 192.0 107.4 54.8
SSP selling price ($ per barrel)4 101.20 91.90 99.55 99.24 61.27
Average West Texas Intermediate ($ per barrel) 95.11 94.15 98.05 92.91 48.80
SSP selling price premium over West Texas Intermediate (%) 6.2 -2.4 1.5 6.6 22.7
Revenues4 ($ million) 8,655 10,708 9,706 9,703 9,306
Retained earnings5 - - - - -
Community investment ($ million) 5.0 6.0 6.6 6.0 6.1
Royalty payments ($ million) 759 359 582 669 351
Government of Alberta carbon payments6 ($ million) 21.18 14.36 26.73 19.90 19.73
Payroll and corporate taxes ($ million) 404 394 382 423 388
Municipal taxes ($ million) 105 102 100 113 131
Purchased energy7 ($ million) 528 339 392 560 318
Employees (net, $ million) 907 866 849 702 847
Goods and services purchased ($ million) 4,191 5,510 6,289 5,503 3,284

Operations Performance

2011 2012 2013 2014 2015
Spills8 (#) 0 0 0 0 0
Environmental Compliance Incidents9 (#) 4 17 28 12 24
Environmental fines10 ($ million) 0 0 0 0 0
Environmental protection orders (#) 0 0 0 0 1

1 Production is Syncrude Sweet Premium (SSP) crude oil shipped.
2 Operating costs are costs related to the mining of oil sands, the extraction and upgrading of bitumen into Syncrude Sweet Premium (SSP) crude oil, and maintenance of facilities; they also include administration costs, start-up costs, research, and purchased energy, but do not include development expenses. There is no generally accepted accounting definition as to what constitutes “Operating Costs.”
3 Capital expenditures includes development expense related to sustaining capital and growth capital projects. The accounting treatment of certain costs may vary significantly between different producers; some producers may elect to capitalize or defer and amortize certain expenditures that are recorded as an expense by other producers, and may segment “Corporate” costs.
4 Production of Syncrude Sweet Premium (SSP) crude oil becomes the property of Syncrude’s Joint Venture Participants at point of departure from the Syncrude plant. As the operator, Syncrude does not collect revenue from the sale of crude oil or other products. Selling price and revenue reported here is solely meant to provide an indication of performance.
5 Syncrude’s annual operating and capital expenditures are funded pro-rata by the Syncrude Joint Venture Participants.
6 Includes fund credit purchases paid to the Government of Alberta under the Specified Gas Emitters Regulation (SGER).
7 Includes expenditures related to purchased bitumen.
8 Spills or leaks of hydrocarbons, chemicals, waste water and/or recycle water which were not fully captured nor directed into approved containment or disposal. Releases are reported to the Alberta Energy Regulator (AER) and Alberta Environment and Parks (AEP). During the reporting period, no spills occurred off-lease or into the surrounding environment.
9 An Environmental Compliance Incident is a failure, equipment bypass, or upset, that results in a numerical limit exceedence or operating without a control device (or a malfunctioning control device) as identified in Syncrude's AEPEA Operating Approval. Data prior to 2012 includes only those incidents of limit exceedences.
10 In 2012, an administrative penalty of $5,000 was paid to the Government of Alberta for failure to sufficiently report the release of emissions due to an isolated on-site sour water leak in July 2010.
Note: These figures may differ from those reported by any of the Joint Venture Participants due to differences in reporting conventions and methodology.