Suncor Energy and the Oil Sands: First place in my book

The largest oil reserve in the world lies in Saudi Arabia with over 260 billion barrels of crude oil. If Saudi Arabia takes the gold medal in the oil reserve competition, then who takes the silver?

The silver medal goes to the Canadian Oil Sands in Alberta with 175 billion barrels of oil reserves. Coming in 2nd place is usually a big let down. The only famous 2nd place finish I remember was Nancy Kerrigan, when she won the silver medal in 1994. It was the first time I watched ice-skating because of the scandal surrounding Kerrigan and that kneecapping goon Tonya Harding. Nancy didn’t get the gold and it was a major disappointment.

However, the silver medal in the oil reserve competition is nothing to cry about. In a recent 60 minutes interview a leading engineer from Shell Oil declared there is even more oil buried deeper underground:

"We know there's much, much more there. The total estimates could be two trillion or even higher," says Clive Mather, Shell's Canada chief. "This is a very, very big resource."

Suddenly, the silver medal isn't so bad; you can almost hear "Oh Canada" playing in the background, can't you?

The major players in the Canadian Oil sands are Suncor Energy (SU), Syncrude, Shell Canada (SHC), Nexen (NXY), CNRL (CNQ), and Imperial Oil (IMO). The oil has always been in the sands and in 1967 Suncor began perfecting the process of extracting the oil in a cost efficient manner. But there was a problem up until very recently.

Extracting oil from the Oil Sands deposits was not profitable when oil traded under $30 a barrel. We haven't seen oil at $30 a barrel since 2003, on Friday oil closed at $60.55 a barrel. Back in July oil hit $78 a barrel and the price has been inching back down ever since. Oil prices over the last few years have lead to a gold rush, black gold that is, Texas T… you know the song. In the next 10 years $100 billion will be invested in the area surrounding the oil sands, let me mention that figure again, $100 billion.

Last January, Suncor celebrated the sale of its billionth barrel of oil. Last year Suncor brought home $11,086 million in revenue and last month production was roughly at 273,000 barrels per day. However when you're in the oil business, you have critics and countless individuals trying to stop you from destroying the environment. I am all for protecting the environment, I don't think anyone would disagree, but our nation and the world is addicted to oil. That's a fact the public would love to change but until the powers that be make that possible, we need oil, we need gas, and we need jet fuel.

Our neighbor to the north, one that we get along with, one that millions of American's cross the friendly border on a weekly basis and separates our two countries is sitting on perhaps the greatest natural resource the world has discovered in the 21st century. The Oil Sands are not the solution to America's oil problem but perhaps working with companies like Suncor could better our situation and help ease the gas price increases we see every summer. What's more puzzling is why is there not a greater effort being made by America to work with Canada to resolve our need for oil? Instead our President and his Superfriends do business with the Middle East, a hostile territory that contains various groups resembling the interests of Lex Luthor and the Legion of Doom.

Why not partner with a peaceful nation and do greater business with Captain Kirk from the Starship Enterprise, or Alex Trebec from Jeopardy?

The recent hype is that oil is going back to $30 a barrel and everyone dumping oil stocks is just that, hype. Sure oil prices will cool down, they were at $78 a few months ago for crying out loud and international affairs have subsided for the moment (knock on wood - Iran). If you really think oil will get that low again, you need to read the Oil Factor by Stephen and Donna Leeb. They were right on with their predictions of oil prices at the levels they are at today. The world's oil supply is depleting, and when demand exceeds supply, up the price goes, and companies like Suncor are going to cash in big time.

Until the world embraces alternative fuels such as ethanol, biodiesel,and methanol; oil companies will continue to run the world and enjoy huge profits.

Suncor is striving to produce half a million barrels a day and they are halfway there. In 2006 they are targeting to keep cash operating cost to $16.00 to $16.75 per barrel. The Canadian government wants the Oil Sand companies to succeed. Besides bringing in foreign investors, companies like Suncor are stimulating Canada's economy by the manufacturing of tires, trucks, gauges, valves, pumps, etc. Suncor is a value play, and over the next five or ten years, just imagine what the stock could be valued at. Over 1 million barrels of oil are produced today from the Oil Sands, by 2015 they are predicting 2.7 million barrels produced on a daily basis. Even if you hate oil companies more than Tonya Harding, Suncor is a competitor that will not fall down if hit in the knee (take that Jeff Gillooly).

Article written by: Frank Lara Jr.
Article posted on: September 25th, 2006

Disclaimer: The author does not hold any shares or positions of SU at the time this article was posted.