September 9, 2009 / 4:33 PM / 10 years ago

UPDATE 1-Suncor scraps plan for C$1 bln unit at refinery

* Cancels plan for coker, which had already been delayed

* Intends to keep refinery in Montreal as Shell mulls sale

CALGARY, Alberta, Sept 9 (Reuters) - Suncor Energy Inc (SU.TO), Canada’s biggest energy company, has scrapped plans for a C$1 billion ($926 million) heavy oil processing unit at its Montreal refinery after determining other investments offer richer returns, a spokesman said on Wednesday.

The plant’s former owner, Petro-Canada, which Suncor acquired in a C$22.7 billion takeover last month, had already delayed making a decision on going ahead with the coker project, citing poor market conditions.

One reason for taking the project off the table is that market conditions have changed considerably since the plan was first proposed a few years ago, Suncor spokesman Dany Laferriere said.

“The second one is that, with the merger of Petro-Canada and Suncor, the new company has a lot of different options to maximize the efficiency of capital investments.”

Petro-Canada’s plan had called for construction of a 25,000 barrel a day coker, a unit that allows a refinery to process heavier, and usually cheaper, grades of crude. It had done detailed engineering.

Suncor is weighing the merits of numerous potential investments as it aims to make the most of the new entity’s assets, Laferriere said.

Last week, the company, best known for its extensive oil sands holdings, said it will lay off 1,000 people as it looks to cut costs following the takeover. That represents nearly 8 percent of the total workforce for both companies.

However, Suncor has no plans to sell the 130,000 barrel a day refinery, one of two in Montreal, he said.

In July, Royal Dutch Shell Plc (RDSa.L) said it may sell or close its 76-year-old refinery in Quebec’s largest city as the industry struggles with weak profit margins.

$1=$1.08 Canadian Reporting by Jeffrey Jones; editing by Rob Wilson

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