Good morning, Mr. Chair and members of the committee.
On behalf of Suncor Energy, I would like to thank you for the opportunity to attend this morning’s meeting, and I look forward to discussing with you how we view our refining business and some of the challenges and opportunities we are facing.
I’m going to focus my opening remarks on three areas: one, to provide you an overview of Suncor's Canadian refining business and its impact on jobs and the economy; two, to outline what we have been doing to ensure the competitiveness and ongoing viability of our refineries; and three, perhaps most importantly, to share with you our view of the future for the refining sector here in Canada.
Suncor Energy is the largest integrated energy company in Canada and the fifth largest energy company in North America. We are, of course, best known for our leading position in oil sands production and development, but we also have extensive operations in refining and marketing, North American natural gas production, and oil and gas production both off Canada’s east coast and internationally.
But I’m here today to primarily represent our Canadian refining business. We have four refineries in Suncor. Three of them are located here in Canada: one in Edmonton, Alberta; one in Sarnia, Ontario; and one in Montreal, Quebec. Our fourth refinery is located in Commerce City, just outside Denver, Colorado.
The combined crude capacity of our three Canadian refineries is roughly 350,000 barrels per day. Our refineries are closely integrated with the other businesses inside our refining and marketing division. Those businesses include our retail business, with 1,500 Petro-Canada sites here in Canada, entirely operated by independent business men and women; our wholesale business with over 200 Petro-Pass locations and a base of more than 26,000 wholesale customers; and we also have a world-class lubricants facility located in Mississauga, Ontario. That facility sells more than 350 highly specialized products in more than 70 countries around the world.
We run an extensive distribution and product terminal operation across the country, and we also have Canada’s largest ethanol plant located just outside Sarnia, Ontario.
The divisional headquarters for these combined businesses is in Mississauga, Ontario. In total, our refining and marketing business has 3,300 full-time employees and creates thousands of jobs directly in our retail and wholesale associate networks and indirectly with contractors and suppliers across the country.
I also want to mention that our upgraders in Fort McMurray, although not quite refineries and not managed within our refining and marketing division, do produce some high-quality diesel fuel. Their primary purpose is to upgrade bitumen to higher-quality synthetic crude, but as part of that process there is some diesel fuel produced as well. We currently operate two upgraders at Fort McMurray, and between them they produce about 25% of our western Canada diesel supply.
With that quick overview of our refining and marketing business, let me refocus on our Canadian refinery operations.
As I think you are aware, they are a significant contributor to the economy. A recently released report by the Conference Board of Canada, which studied the Canadian petroleum refining sector, estimates the contribution made by this sector to be at about $2.5 billion of real GDP in 2009. Based on our refinery capacity, Suncor represents about 20% of that sector, and I expect we contribute at least our share of that economic impact.
I think it’s also important to note that the industry does employ highly skilled workers, and accordingly we pay well above average wages and salaries. That same Conference Board report states that refinery workers now earn 50% more than workers in the overall manufacturing sector in Canada, and this wage premium has continued to grow over the years.
We are highly committed to all of our refineries and will continue to operate them as long as we can do so in a competitive and profitable manner.
We also recognize the importance of building sustained relationships with all our stakeholders. Our refineries are actively engaged in their local communities through our community liaison committees, with organizations like the United Way, and our extensive support of educational, training, and scholarship programs.
We're also a highly regulated industry, so we work closely with policy-makers and regulators at all levels of government to try to ensure regulations impacting our industry are clear, harmonized, and science-based, while still meeting the needs of Canadians. However, we are in a business that must compete globally, and we must continue to work together to ensure that playing field is as level as possible.
So what have we been doing to help secure the long-term competitiveness and profitability of our refineries? We work particularly hard on those areas of the refining business that we control directly, such as safety, efficiency, and reliability. We have made substantial progress in each of these areas in recent years, and we will continue those efforts.
We also make significant investments in all of our refineries: investments that allow us to improve their safety, reliability, and environmental performance, fuel quality, and also adapt the refineries to the changing composition of Canadian crude oil.
I'd especially like to highlight the multi-billion dollar investments we’ve made in recent years at Edmonton and Sarnia to adapt those facilities so they can run 100% western Canadian crude oil, and in the case of Edmonton, 100% oil-sands-derived crude oil. These investments have positioned those two refineries to move away from the declining availability of conventional light western crudes and to take increasing advantage of the growing oil-sands-based crudes.
At this time, Montreal is our only Canadian refinery that is not linked to western crude oil. It does source approximately 25% of its current crude supply from Canada’s east coast offshore oil production, but the remainder of its supply is foreign sourced. It's capable of running some western crudes today, but there's no pipeline connection to allow that to happen at a cost-effective level. So we are supportive of the reversal of Enbridge’s line 9 crude pipeline. If reversed, that line currently running from Montreal to Sarnia would allow our Montreal refinery to connect to western crudes. That, in turn, could foster possible investments at Montreal to allow it to more fully adapt to those crudes. We believe that would help secure Montreal refinery’s long-term flexibility, its performance, and its viability.
With regard to how we see the future of our refineries in Canada, as I said, we're committed to our plants as long as they are competitive and profitable, but the reality is that currently Canada is a net exporter of refined petroleum products. Recent reports I have read certainly also suggest that in 2011 the United States also became a net exporter of refined petroleum products, for the first time in sixty years.
According to the IEA’s World Energy Outlook, although there will continue to be growth in world oil demand for many years to come, and some modest growth in diesel in North America, overall gasoline and diesel demand in North America and the other OECD countries is forecast to decline. The current surplus of refining capacity in North America, coupled with declining demand, does not easily support the expansion of domestic refining capacity.
Refinery capacity will certainly be needed in the developing world; it will almost certainly be built there. However, we do believe that our refineries are well positioned to compete in their local markets, and we will continue to work hard to make the necessary investments to support that, but our current view of the future does not support significant capacity expansions at our refineries here in Canada.
Having said that, Suncor does have plans for a 200,000-barrel-per-day expansion of its crude oil upgrading operations in Fort McMurray, targeted for completion in 2017. This will result in an increase of about 30,000 barrels per day of additional diesel supply at that site. We are currently in the process of assessing how we will market that increased supply.
In closing, we look forward to continuing our work with governments to ensure that necessary conditions are in place to support a sustainable refining industry in this country and to ensure we are able to compete on a level playing field with our global counterparts.
I'd also like to extend an invitation to any of you on the committee, any of the other members of Parliament, or whoever is in the audience here today who might be interested, to tour one of our refineries. I'd be happy to make arrangements for that.
Thank you, and I look forward to your questions.