Suncor Energy Inc. is poised to crank up production at its Fort Hills oil sands mine despite its own reservations about a fire-protection system installed by one of the project's suppliers.
Suncor and its partners in the giant mine said in court documents the megaproject faces heightened risks owing to alleged defects in a protective coating applied to steel structures. The coating is meant to mitigate the potential effects of a major fire on the plant and its workers.
The concern is spelled out in a lawsuit filed earlier this month in the Court of Queen's Bench of Alberta in Calgary by Fort Hills Energy LP, the limited partnership comprised of project partners Suncor, Total SA and Teck Resources Ltd.
The partners are suing Jotun AS of Norway, its affiliate, and a contractor, seeking at least $182-million in damages for supplying a product they say did not meet quality and integrity standards. The allegations have not been tested in court.
Calgary-based Suncor, which owns 50.8 per cent of Fort Hills and is the operator, has accelerated spending at the $17-billion project this year to meet its year-end goal of starting production. Output is expected to hit 194,000 barrels per day over time.
The court documents show the partners were eager to stick to that schedule, even while acknowledging "a higher level of risk of property damage at the mine than originally envisioned and accepted."
It marks the latest commercial dispute to hit a project beset by rising costs and weak oil prices. French energy giant Total has cut off funding for the development and mulled a sale of its 29.2-per-cent stake, in part because of cost pressures. (Teck owns the remaining 20-per-cent share.)
Suncor has downplayed that dispute, insisting the project is fully funded. "It remains on track," Steve Reynish, executive vice-president of strategy and corporate development, told reporters in Calgary last week.
But costs have climbed partly as a result of repairs, monitoring, containment, removal and replacement of the faulty coating, a process that will take at least five years and require maintenance of structural steel for the mine's entire lifespan, according to the claim.
Engineers had identified potential for a major fire in an area of the plant that processes raw oil sands bitumen during the project's design stages, noting it could damage property and potentially "threaten the safety and life of workers" at the project, the documents show.
The coating, supplied by Sandefjord-based Jotun and known as Jotachar JF-750, was meant to lower that risk. It was applied by a contractor, Yong Hyun P&P Co. Ltd., starting in August, 2015, through to February, 2016.
The companies formed part of a far-flung supply chain used by Suncor to avoid cost blowouts similar to those experienced by rival Imperial Oil Ltd. at its $21.8-billion Kearl oil sands development.
However, multiple inspections revealed the coating was subject to cracking and detaching from structural steel, in part because it was not suited to northern Alberta's climate.
Suncor and its partners ruled out fully removing the coating from affected areas or refireproofing all the plant's structural steel, once installed. Doing so would "irreparably delay" the project and "severely impair" its economics, according to the claim.
Instead, they opted for "limited remedies" that included removing the coating in some areas and wrapping it in others to prevent falls. In limited cases, according to the claim, they accepted a "reduced level" of fireproofing, or none at all.
A Suncor spokesperson would not address specifics of the case because it is before the courts. But in an e-mail, Sneh Seetal said the company is not compromising safety. Defects were identified early on and are being fixed, she said.
"The repair methodology that was applied meets industry standards and provides the same level of fire protection required by the original facility design," she said.
"To be clear, we are still fireproofing all areas necessary to protect the safety of our workers. Fireproofing was reduced or not used only in areas where we determined there was no safety risk for people."
Jotun has not filed a statement of defence and did not respond to a message seeking comment. Yong Hyun P&P Co. Ltd., also named as a defendant, could not be reached for comment.