On April 6, 2001, Southern Pacific Petroleum, and Central Pacific Minerals (SPP/CPM) and Suncor Energy Inc. announced SPP/CPM’s purchase of Suncor’s interest in the Stuart Oil Shale project. This increases SPP/CPM’s interest in the project to 100 percent.
Under the terms of the purchase:
SPP/CPM, under the direction of J. McFarland, managing director of SPP/CPM, took over the operation of the Stuart Project immediately. Suncor will provide contract, technical and support services for up to 6 months, as required.
Suncor said it sold its interest to SPP/CPM because the Stuart Oil Shale Project no longer fits with the company’s plans for the future. "While we think the project has potential for the future, we had to make a choice among competing growth priorities," said R. George, Suncor president and chief executive officer. "For Suncor, it makes sense to focus our people and resources on growing our core businesses in Canada."
"Suncor has been a valued co-venturer," added McFarland. "With their support, we have built the demonstration plant. Although we have encountered challenges, we also made encouraging progress in proving the technology. A strong foundation is in place for us to build upon and we have an experienced and dedicated team ready to move ahead."
SPP/CPM will own 100 percent of the Stage 1 plant, which has involved an investment to date of $300 million. All parts of the Stuart Stage 1 plant have been commissioned, and according to SPP/CPM, encouraging progress has been made in proving the viability of the ATP technology, a key step in developing a modern oil shale industry in Australia. The plant is now poised to move into the operational phase.
As of April, about 35,000 barrels of oil products have been produced, with a value of about A$2.5 million. The two major products are medium shale oil and naphtha. Stuart naphtha is a high-quality, low-sulfur (less than 1 part per million) oil product. It is expected to make an ideal feedstock for Australian refiners to manufacture a new generation of low-sulfur transportation fuels aimed at improving air quality.
SPP/CPM Financially Well Positioned to Fund Stage 1 to BreakevenFollowing the acquisition of Suncor’s interest, SPP/CPM says it will have total investment funds of about A$55 million, including A$7 million as a result of the transfer of ownership. The companies believe that these funds will be sufficient to achieve breakeven at Stuart Stage 1. This occurs at about 35 percent of design throughput, due to the entitlement of exemption from federal excise taxes, and is expected to be achieved by the fourth quarter of 2001.
A Stuart Transition Team headed by McFarland and including representatives from Stuart site operations and SPP/CPM’s Brisbane office, was formed to ensure a smooth and expeditious operational turnover.
In its new operating role, SPP/CPM believes that it has the commitment, skills and ideas to take on the job of operating the Stuart plant and applying new approaches to achieve success. The focus will be on a rigorous approach to increasing plant reliability and plant run-time and achieving early sales. Efforts will also continue to demonstrate that oil shale can be developed in an environmentally sustainable manner. The companies will step up efforts to work with the community and government to bridge the gaps that exist in understanding and assessing the impacts of oil shale and other development activity in the area.
Additional Technology Rights AcquiredAs part of the Stuart purchase, SPP/CPM will also acquire new rights to sub-license the ATP technology for oil shale applications outside Australia. SPP/CPM currently has ATP technology use rights anywhere in the world, exclusive sub-licensing rights in Australia and receives a large share of any licensing revenue. SPP/CPM and Suncor will continue to cooperate on ATP technology development in the future.
Return to Synthetic Fuels Report 8-2 table of contents