Key components of the plan include continued development of Stages 3 through 6 of the company’s 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. In addition, Suncor has entered into a strategic partnership with Total E&P Canada Ltd., setting the terms for the two companies to jointly develop the Fort Hills and Joslyn oil sands mining projects and restart construction of the Voyageur upgrader at Suncor’s oil sands operations north of Fort McMurray, Alberta. The transaction is subject to certain regulatory and other approvals, with closing targeted late in the first quarter of 2011.

The agreement with Total is an important element of Suncor’s plans to more than double our oil sands production. The deal brings a strong partner to the table, helping us to accelerate development of our growth portfolio and share in the capital investment in a third upgrader and development of new mining projects.

We see several strategic advantages in the partnership with Total. They will be able to access our technological expertise and 43 years of oil sands knowledge, while we will benefit from Total’s global operating experience. Together, we will be able to pool our manpower and capital resources and bring our collective strengths to bear to manage these projects using best-in-class operating practices.

—Rick George, Suncor president and CEO

Suncor/Total alliance. Click to enlarge.

Under the alliance, the companies will pool their combined interests in these projects, with the respective operator holding 51% and the other partner 49%. The agreements comprise four significant and related transactions:

• Total is acquiring 19.2% of Suncor’s interest in the Fort Hills project. Taking into account Total’s acquisition of UTS, finalized in October 2010, the company will have an overall 39.2% interest in Fort Hills. Suncor, as operator, will hold 40.8%. Teck Resources Ltd. continues to own its 20%.

• Suncor is acquiring 36.75% of Total’s interest in the Joslyn project. Total, as operator, will retain a 38.25% interest in the project, with Occidental Petroleum (15%) and Inpex (10%) holding the remaining 25%.

• Total is also acquiring a 49% stake in the Suncor-operated Voyageur upgrader project located near Fort McMurray. This facility of which construction was suspended in 2008 will have a capacity of around 200,000 barrel per day (b/d) of upgraded products and will process Total’s Fort Hills and Joslyn bitumen production. Work will resume once the front-end engineering design is updated in 2011.

• As a result of the terms of these transactions and the related net balancing of the portfolio, in particular to contribute to the past costs of the Voyageur project, Total will pay Suncor C$1,751,250,000 (US$ 1.728 billion), with a value date of 1 January 2011.

Suncor and Total have agreed to a joint commitment to develop Fort Hills and Voyageur in parallel so that both come on stream 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 b/d commencing in 2017-2018, subject to receiving the necessary permits.

The implementation of the agreements is subject to securing the necessary regulatory approvals from the Government of Canada and certain other approvals. As a result of the agreements, Total will no longer proceed with the planned construction of an upgrader in Edmonton.

In line with the strategy of partnerships deployed around the world for the benefit of our operations, Total is delighted with these groundbreaking agreements with Canada’s Suncor. Suncor Energy Inc. is a top-tier partner with recognized oil sands mining expertise and experience. This collaboration will allow us to strengthen our portfolio of Canadian oil sands assets, opening new opportunities to develop these strategically important energy resources. We are excited to join our forces with Suncor for the development of these three major projects: Fort Hills, Joslyn and Voyageur.

—Yves-Louis Darricarrère, President of Total Exploration & Production

Suncor 2011 capital spending plans. Supporting the first stages of the company’s long-term growth strategy, Suncor’s Board of Directors approved a C$6.7 billion capital spending plan for 2011. Approximately C$2.8 billion will be directed toward growth project funding, primarily at the company’s oil sands operations, while C$3.9 billion in spending is targeted to sustaining existing operations, including significant planned maintenance to support reliability and further deployment of new tailings reclamation technology. Approximately 40% of planned sustaining capital is targeted to spending that is not expected to recur on an annual basis.

The majority of growth spending will be directed toward expansion of Suncor’s Firebag in situ oil sands facilities. Firebag Stage 3 is targeted to begin production late in the second quarter of 2011, ramping up toward capacity of 62,500 barrels per day (bpd) of bitumen over approximately 24 months. Construction at the company's in situ facilities will then shift fully to Firebag Stage 4 to support a planned completion target in early 2013. Stage 4 also has a planned capacity of 62,500 bpd.

The company is also directing 2011 growth spending toward the Fort Hills oil sands mining project and resuming construction of the Voyageur upgrader, two key elements in the company’s longer-term growth strategy.

While Suncor’s primary growth focus remains on its large oil sands resource base, 2011 growth spending is also planned for operations in international and offshore operations and renewable energy projects.

Sustaining capital in the upstream portion of the business for 2011 includes $670 million for deployment of Suncor’s TRO tailings reclamation technology, as well as additional funds for maintenance at Oil Sands, Natural Gas and International and Offshore facilities. In downstream operations, spending is primarily focused on planned maintenance and investments to improve environmental performance.

Total in the oil sands. Total operates the Joslyn project and owned a 75% interest until now. Production potential of this mining project is currently estimated at 200,000 b/d, with the Joslyn North Project at 100,000 b/d.

Total owned a 20% interest in the Fort Hills project until now. The project will be developed in two phases. The first phase of approximately 164,000 b/d has already obtained the necessary administrative approvals.

Total also owns a 50% interest in the Surmont steam-assisted gravity drainage (SAGD) project. Phase 1 production began in 2007 and currently averages 23,000 b/d. Phase 2 development began in January 2010, with production scheduled to start up in 2015, enabling Surmont’s total production to increase to around 110,000 b/d. Further development phases are under study.

Total also has a 50% interest in the Northern Lights project following the 2008 acquisition of Canada’s Synenco Energy.

Resources

• Suncor strategic growth update and 2011 corporate guidance (presentation)