Suncor Energy is not proceeding with the Voyageur bitumen upgrader project in the Canadian oil sands. The decision is the result of a joint strategic and economic review launched by Suncor and its joint venture partner Total E&P Canada Ltd in late 2012.
Following the decision not to proceed with the Voyageur project located in Northern Alberta, Total reached an agreement to sell its entire 49% interest in the Voyageur Upgrader Limited Partnership to Suncor Energy Inc, which owns the remaining 51%, for $515 million. The transfer of interest for cash is effective immediately.
The oil market environment in the North America has changed significantly, Total notes. The emergence of an abundance of light oil and condensates produced in the region will increase tremendously the supply of diluents for mining projects and consequently impact upgrader projects in the area. Following a thorough review of its assets shared with Suncor Energy Inc in Canada, Total concluded that the investment in the Voyageur project was no longer justified from a strategic and economic point of view.
Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project. That’s why we undertook a thorough review of the project to determine whether it met our criteria for long-term, profitable growth. This decision is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher-return growth projects and accelerating the return of cash to shareholders through dividends and share buybacks.—Steve Williams, Suncor president and CEO
As a result of not proceeding with the Voyageur upgrader project, Suncor expects to incur a charge to first quarter 2013 net income and cash flow from operations of approximately $140 million and $180 million respectively.
As a consequence of the sale of its stake, and taking into account all past investments, Total will reflect a net loss of $1.65 billion in the intermediate consolidated financial statements for the first quarter of 2013. With this decision, Total will also save more than $5 billion of investment in the next 5 years.
The satisfaction of our strict investment criteria is essential to launch a project and to optimize our portfolio. The Fort Hills and Joslyn mining projects are not impacted by the decision to withdraw from the Voyageur project, and Total remains totally committed to playing a significant role in Canada’s future oil sands development.—Yves-Louis Darricarrère, President Upstream at Total
Total E&P Canada is operator of the Joslyn project, with a 38.25% interest, currently in the engineering review phase. Total also owns a 39.2% interest in the Fort Hills oil sands mining project operated by Suncor Energy. The final investment decision for Fort Hills is expected within the late 2013 timeframe.
Total possesses a 50% interest in the Surmont SAGD (Steam Assisted Gravity Drainage) project operated by ConocoPhillips Canada. Phase 1 production currently averages 26,000 barrels of bitumen per day, with Phase 2 currently under construction to reach an eventual production plateau of approximately 130,000 barrels of bitumen per day from 2015 onwards. Additional development phases are under study.
Total also owns 50% and is operator of the Northern Lights Project with partner Sinopec.