Total subsidiary Total E&P Canada and Suncor Energy have signed several agreements to form a strategic oil sands alliance encompassing the Suncor-operated Fort Hills mining project, the Total-operated Joslyn mining project, and the Suncor-operated Voyageur upgrader project. All three projects are located in the Athabasca region of Alberta, Canada.
Under the alliance, the companies will pool their combined interests in these projects, with the respective operator holding 51% and the other partner 49%. As a result of the terms of the transactions, in particular to contribute to the past costs of the Voyageur project, Total will pay Suncor C$1.7 billion, with a value date of January 1, 2011.
Implementation of the agreements is subject to necessary regulatory approvals by the Canadian government and certain other approvals. Closing is targeted for the first quarter of 2011. As a result of the agreements, Total will no longer proceed with previously planned construction of an upgrader in Edmonton.
The agreements call for:
• Total to acquire 19.2% of Suncor’s interest in the Fort Hills project. Taking into account Total’s acquisition of UTS, finalized in October 2010, Total will have an overall 39.2% interest in Fort Hills. Suncor, as operator, will hold 40.8%. Teck Resources will continue to own 20%;
• Suncor to acquire 36.75% of Total’s interest in the Joslyn project. Total, as operator, will retain a 38.25% interest, and Occidental Petroleum (15%) and Inpex (10%) will hold the remaining 25%; and
• Total to acquire a 49% stake in the Suncor-operated Voyageur upgrader project near Fort McMurray. The facility, where construction was suspended in 2008, will have a capacity of around 200,000 barrels per day of upgraded products and will process Total’s share of Fort Hills and Joslyn bitumen production. Work will resume on the project once the front-end engineering design is updated in 2011.
Suncor and Total have agreed to a joint commitment to develop Fort Hills and Voyageur in parallel so that both come on stream in early 2016. The main engineering and procurement contracts for these two projects will be awarded in 2011. Both companies have also confirmed the Joslyn North mine timetable, with production of 100,000 barrels per day beginning in 2017-2018, subject to receiving the necessary permits.
Concurrent with the announcement of the Suncor-Total alliance, Suncor announced plans to increase its production to more than 1 million barrels of oil equivalent per day by 2020, beginning with the company’s 2011 capital spending plans. Over the next 10 years, Suncor is targeting oil sands production growth of approximately 10% per year and company-wide production growth of approximately 8% per year.
In addition to projects covered under the Suncor-Total alliance, Suncor plans to continue development of Stages 3 through 6 of the Firebag in situ project, development of a second stage of the MacKay River in situ project, and investments and ongoing production in international and offshore operations.
Supporting the first stages of the company’s long-term growth strategy, Suncor’s board of directors has approved a C$6.7-billion capital spending plan for 2011.
