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Total tap dance in Canada oil sands Company has made hostile bid for startup junior while unloading minority position in another startup; questions about C$9B project Gary Park For Petroleum News
France’s Total is bewildering the Alberta oil sands sector as it moves in all directions at the same time.
It is engaged in a hostile bid for a startup junior, is unloading a minority chunk of another startup operation and raising a flurry of questions about the future of a planned C$9 billion project.
Where it is headed is anyone’s guess, but the direction seems less clear than its earlier target of raising output from the oil sands to at least 500,000 barrels per day within 10 years.
The biggest doubt now surrounds its Joslyn project, where it is operator and 74 percent owner of a lease (Occidental Petroleum has 15 percent, Japan’s Inpex 4 percent and Laricina Energy 1 percent) where it planned to produce up to 230,000 bpd.
Total was scheduled to make a final investment decision this year, but now says a verdict is not likely until 2010 while it “talks” to contractors about costs — a clear signal that Total like all other oil sands developers is confident that previous cost estimates can be drastically reduced because of the economic downturn.
Questions about Joslyn But the postponement is raising questions about the quality of the Joslyn lease, which is adjacent to Canadian Natural Resources’ Horizon property, stirring speculation that Total may be eager to bid for Horizon, or perhaps all of Canadian Natural.
However, Joslyn has encountered problems, with Total conceding in a report that a pilot project, using steam-assisted gravity drainage technology, fell short of the expected 10,000 bpd production plateau “due to constraints on the pressure of the steam being injected.”
It had hoped to reach the target in early 2008 by using steam-assisted gravity drainage rather than surface mining; now the permit is likely to be developed through mining in two phases of 100,000 bpd.
Total is also a 50 percent partner in the Surmont project, operated by ConocoPhillips, where production has been averaging about 18,000 bpd for more than a year and is designed to reach 110,000 bpd in a second-phase development.
As well it is 50 percent operator of Northern Lights, after selling a 10 percent stake earlier in April to China’s Sinopec, which previously owned 40 percent.
Upgrader under study The partners have started engineering studies for an upgrader in the Edmonton area, with initial plans to process 150,000 bpd of bitumen starting in 2015, rising to 200,000 bpd in a second phase.
But, like all new upgraders, that has been delayed as costs and the market outlook get a fresh appraisal.
Total’s C$617 million offer for UTS Energy, which owns a 20 percent stake in Petro-Canada’s stalled Fort Hills project, has been extended to April 16 in the face of a flat-out rejection by UTS, which calls the bid “financially inadequate.”
Total Chief Executive Officer Christophe de Margerie said recently crude oil prices need to be about US$80 per barrel to justify investments in the oil sands.
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