Oil Sands Giant Suncor Slashes Spending in Half

Suncor Energy, Canada's second-largest oil sands operator, slashed its planned 2009 spending in half Tuesday and shelved major expansion projects with crude prices in free fall.

The Calgary-based company said it plans to spend $3 billion Canadian ($2.4 billion), with just a third of that going toward growth projects.

It was the second time Suncor has scaled back projects in recent months. In October, the company slashed its planned capital expenditures from between $9 billion Canadian ($7.1 billion) and $10 billion ($7.9 billion) to $6 billion Canadian ($4.8 billion).

Alberta's once booming oil sands sector has cooled as major producers from Europe to North American pull back spending. It is extraordinarily expensive to extract crude from sand, making it less profitable to do so with even benchmark crude beginning to fill storage facilities.

Suncor shares fell about 20 percent on the New York Stock Exchange.

Also Tuesday, Suncor said the precipitous drop in commodity prices caused a quarterly loss of $215 million Canadian ($170 million) or 24 cents Canadian (19 cents) a share.

"The tail end of 2008 was a very tumultuous time in the financial and the commodity markets. In lots of ways, we're more than glad to see 2008 in the rearview mirror," Suncor Chief Executive Rick George said on a conference call.

Suncor set its 2009 oil sands production outlook target at 300,000 barrels of oil equivalent per day. Oil sands production in 2008 slipped to 228,000 barrels per day from 235,000 produced in 2007.

The company's total upstream production for 2008 averaged 264,700 barrels per day, down from a 2007 average of 271,400.

Industry officials estimate northern Alberta could yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves.

President Barack Obama has criticized America's dependence on Middle East oil. Canada's oil sands projects would help, but a top Obama adviser said during the campaign said last year that greenhouse gas emissions from converting the sands into oil are unacceptably high and may run counter to Obama's plan to shift the U.S. away from carbon-intensive fossil fuels.

Enormous amount of energy and water needed to extract the oil from the sand.