Suncor Energy starts the long goodbye to Rick George, the man who built it from broken to megaweight
This article appears in the February issue of Oilsands Review; photo from here
By Peter McKenzie-Brown
Bob McClements has had a long association with the oilsands industry. He was construction manager for Sun Oil Company’s (Sunoco) original Great Canadian Oil Sands plant and the first plant manager when it went on stream in 1967. When it commissioned that pioneering plant, Sunoco was one of the largest integrated oil companies in the world. In the 1980s McClements rose to its highest ranks, becoming president and chief executive officer.
When Sunoco was near the top of its game, McClements asked American-born Rick George—who at the time was in charge of Sunoco’s North Sea development and production, and had overseen construction of Europe’s first purpose-built offshore production platform—to take charge of the company’s Canadian subsidiary, Suncor Energy Inc.
“I flew over to London and asked him whether he would give up his position with an established operation in the UK and move to a totally different environment in Canada. After only a day, he agreed,” says McClements. “You have never met a more unassuming, low-key but brilliant executive in your life. He’s quiet and unassuming, but when he speaks you listen. He knows what he’s doing because he came up the ranks. He was given increasing responsibilities and he did well in every one of them.”
Headquartered in Toronto until 1995, George became Suncor’s president and chief operating officer in 1990; the following year the board appointed him chief executive officer. Also in 1991, McClements retired and Sunoco accelerated its policy of divesting upstream assets so it could focus instead on refining and marketing. Accordingly, it spun off Suncor as an independent entity.
Big mistake: Suncor had market capitalization of $1 billion when George took over. Today it’s about 48 times bigger, and 12 times larger than Sunoco. Rick George, who recently announced that he will fully retire at the end of July, was the architect of this spectacular business achievement. In his years at the helm of Suncor, McClements said with some understatement, “he has become the number one executive in the oilsands.”
Why did its owners divest Suncor? According to George, “We were actually going through a recession back in 1991-92, both here in North America and in Europe. It was a period of time at which the Government of Ontario [75 per cent owner] was struggling with paying their bills. This was an area they could liquidate. Sun Company had some issues around debt as well. It was just fortunate that both of them actually needed money at the time and decided to sell Suncor to the public.”
When George took over, Suncor’s primary assets included the money-losing oilsands plant, some service stations and a small refinery in Ontario. The oilsands business “really struggled with return on capital well into the mid-1990s [because of] high costs relative to low oil prices,” George said in a recent interview conducted for the Petroleum History Society’s Oil Sands Oral History Project. “There were 20–25 years of real struggle between when this industry got its first plant online and when it actually started to make enough money to make sense.”
Building an oilsands heavyweight
Assisted in the early years by Dee Marcoux, executive vice-president, oilsands, the first items of business during George’s presidency were to restructure the 60,000-barrel-per-day plant, deploy truck-and-shovel technology for mining, make major improvements to the processing plant, and expand capacity to 130,000 barrels per day by 2001.
In 1998 Suncor filed its regulatory application for Project Millennium, comprised of mining capacity increases and a new upgrader. The project was a dramatic expansion designed to increase production to 210,000 barrels per day. George recalls that, “about the time our board approved the Millennium Project, which was 1997, The Economist had a front page view that they expected prices to be at $5.00 a barrel for a long period of time…I think what they lost track of is that this industry moves through cycles and it will continue to roll through cycles as we invest, as we try to figure out where the next investments should be.”
Millennium was a good investment, he added. “We started the project when there were low oil prices. When we got the project done in 2002, oil prices rose and it was obviously a great win for our shareholders. I always think of oil companies as big deployers of capital. And I think the management and leadership of oil companies is really about making right choices at the right time.”
In 2001, Suncor announced its Voyageur growth strategy, a multi-pronged approach targeted to bring oilsands production to 500,000 barrels per day by 2012. The plan included a mine extension, third upgrader, and in situ expansions at the Firebag steam assisted gravity drainage (SAGD) project. The Voyageur strategy was slowed by the global recession, but not derailed. Its most significant piece, the Voyageur upgrader—now a joint venture with Total E&P Canada—is expected to be re-sanctioned in the near-term. George says the upgrader should reduce business volatility. “It should improve reliability. It’s going to be a project that will be online for 50 to 100 years…you’ve got to take a very long-term view of this business.”
And that long-term view rests a lot on in situ development. In addition to undeveloped leases and the MacKay River SAGD project acquired through Suncor’s 2009 merger with Petro-Canada, Suncor considers its Firebag assets to be a key piece of the future. “Firebag is in the middle of a lease we hold that has 9 billion barrels of recoverable oil,” George says. “So this is again an asset base that will be on production for the next hundred years in some form or another.”
Putting assets together
In 2009, George announced a $19.1-billion bid to take over Petro-Canada. With the merger’s success, Suncor suddenly had a much bigger refining and marketing presence in Canada, light oil and gas properties around the world and significant additional oilsands properties.
“If you look at it in a historic sense, we picked Petro-Canada off at the low point of the market, or pretty close to that,” he says. “I’d thought for a period of time about putting the assets together, particularly their downstream with our upgrading and our upstream made a lot of sense. The opportunity to drive synergies, to drive costs out the system—all of that was there in spades. I think it was a great move, made at the right time. And, you know, most mergers actually don’t drive shareholder value. This is one that did.”
George is competitive when it comes to production systems and oilsands technology, but collaborative on environmental issues. As one of the founders of the Oil Sands Leadership Initiative, he believes the industry should share “anything to do with safety, the environment, environmental improvement, anything on reducing our air, land and water footprints. This is important, very important.”
On the future of the oilsands sector
George says that even though he has been at the helm of Suncor for 20 years, the real excitement is yet to come.
“I think the next ten years in this industry are going to be some of its best,” he said, pointing specifically to technology around reducing the environmental footprint of operations. “It is going to astound people how quickly this happens and how well it happens.”
The step-changes will come particularly in the in situ area, he says. “The important thing to remember about SAGD is that is still a very, very young industry. [You’re going to see] a real take-off because of the critical mass of investment in technologies that will rapidly change how we do this. It will reduce water use. It will reduce energy intensity. It will make wells more productive. As wells get to the end of their life, we’ll figure out ways to extend that and recover more.”
George continues, “Listen, industry is looking at all kinds of ways to [improve efficiency], whether it’s use of solvents, surfactants, better downhole pumps, whether you eventually, once you get these caverns, use fire-flood. There are so many technologies out there that are being looked at, being researched, being tried in the field, you’re going to see this thing change rapidly, particularly over the next decade or so. It’s actually quite exciting.”
Suncor’s production has grown significantly under George’s leadership, and will continue as part of his enduring legacy. In the longer term, he notes that the company will “have production coming in from Fort Hills, eventually Joslyn, but also from Firebag, from MacKay River, from our two base mines. And this will feed this large upgrading complex that includes upgrader number one [constructed in 1967], upgrader number two (from the Millennium Project) and upgrader three which is Voyageur. The total capacity of that upgrading facility will be somewhere in the 550,000-barrel-a-day range.”
George leaves behind a strategic plan for Suncor to produce 1 million barrels per day by 2020. “We have the reserves to do it, the strategy to do it, and the environmental approvals for the projects. It’s really down to execution.”
On a cautionary note, he noted some worries the industry should think about.
“You’ve got to be very concerned right now about whether we have enough labour in this part of Alberta. The one difficult thing we have is this oilsands resource in a very remote area. You don’t have a nearby port, you have to bring everything in by truck or by rail. You always have to worry about these inflationary cycles, that we have seen and that we’re likely to see on a go-forward basis. So we just came through a big inflationary period, that 2005 and 2008 period. It’s been calm since the market collapsed in 2008 but…”
George’s final year in the company saw record production, record cash flow and earnings, and total debt way down, to $7 billion. Twenty years ago, could he have imagined that Suncor would become the largest oil company in North America?
“No. That would have been the most improbable thing. But you know what? It’s been an exciting ride. What I would say is, the potential to do those kinds of things is still out there. If I were, you know, 20 years or 30 years younger than I am today…. Opportunities still exist to do those kinds of things.”
Rick George will continue to innovate and lead. As he told the press when he announced his retirement, he won’t be leaving the sector. He’ll still be involved with the oilsands and technology development, but through smaller companies.