The board of directors of Suncor Energy Inc. has given final approval for a $20.6-billion expansion project in its oilsands operation, the company announced Wednesday.

In a statement released Wednesday morning, the company said the project would increase crude oil production at its oilsands north of Fort McMurray, Alta., by 200,000 barrels a day.

Suncor said the expansion is in line with a long-term growth plan first announced in 2001 that would double the company's oil output to 550,000 barrels a day by 2012.

"Our long-term growth strategy called for us to double our business and now, with the board's support, we're constructing an expansion project that is thoroughly planned and engineered," Rick George, Suncor's president and chief executive, said in the statement.

"The years of pre-work leading up to this point will also help us deliver another commitment to our stakeholders — that we would work to ensure all future growth is completed in a safe, reliable and environmentally responsible manner."

Suncor said the expansion plans, which will be completed in phases, include constructing four additional stages of in situ bitumen production as well as building a third upgrader to convert that bitumen into higher-value crude oil.

The company said it has already invested $2.5 billion in engineering and site work for the project.

The announcement comes a day after the company declared a new deal with the Alberta government that would require up to a 20 per cent increase in royalties applied to its mining operations.

In Wednesday's announcement, Suncor said a major focus of the expansion plan would be to reduce the environmental impacts of its oilsands operations.

The company named water management as an area that would benefit from the project, saying it would be completed without an increase to its water licence. The company said it had already made strides in reducing water withdrawals from the Athabasca River.

The plan also includes the installation of sulphur handling systems to improve air quality.

The company said it is looking into carbon capture technology that would reduce long-term greenhouse gas emissions, though the statement said the expansion would result in an "absolute increase" in greenhouse gases.

The company said the project will be financed through cash flow from operations, credit facilities and access to debt capital markets.

Suncor will hold a teleconference Wednesday morning to review the expansion plans in detail.