Canada's Suncor to install cogeneration units at oil sands plant for C$1.4 billion

By Nia Williams

CALGARY, Alberta (Reuters) - Suncor Energy Inc, Canada's second-largest oil sands producer, will invest C$1.4 billion ($1.06 billion) to install two cogeneration units at its Oil Sands Base Plant, reducing greenhouse gas emissions by 25%, the company said on Monday.

The natural gas-fueled cogeneration units will replace coke-fired boilers and provide steam generation for Suncor's bitumen extraction and upgrading operations, as well as 800 megawatts of power to be transmitted to Alberta's electricity grid.

The Base Plant in northern Alberta is Suncor's largest oil sands project, producing 357,000 barrels per day of synthetic crude from its two upgraders.

"We're trying to reduce the greenhouse gas emissions in every barrel we produce and this is a big step forward," Suncor Chief Executive Mark Little told Reuters in a phone interview.

Suncor already transmits about 450 megawatts to the Alberta grid from its existing cogeneration units and the Base Plant project will nearly triple that contribution, Little said.

The project will provide low-carbon power equivalent to displacing 550,000 cars from the road, Suncor said in a statement.

Suncor is aiming for a C$2 billion ($1.5 billion) increase in free funds flow by 2023 and Little said the cogeneration project would generate just over 10% of that through lowering oil sands operating costs and sustaining capital costs.

It will also cut Base Plant sulphur dioxide emissions by 45% and nitrogen oxide emissions by 15%.

Cogeneration uses natural gas to produce both industrial steam and electricity. A number of other oil sands producers including Cenovus Energy Inc and MEG Energy Corp also use it to power their operations.

($1 = 1.3161 Canadian dollars)

($1 = 1.3163 Canadian dollars)

(Reporting by Nia Williams; Editing by Peter Cooney)