Suncor response to Australia: Thanks, but no thanks

Gary Park

Petroleum News Calgary correspondent

Alberta oil sands pioneer Suncor Energy has shown no interest in rescuing an Australian shale oil project that uses Canadian technology.

Southern Pacific Petroleum, which owns a 2.6 billion barrel reserve in the state of Queensland, went into receivership in December, just three months after forecasting a turnaround in its fortunes in 2004.

Southern Pacific said it was counting on positive cash-flow after spending A$400 million over 40 years trying to squeeze a profit out of the world’s only large-scale shale project.

Calgary-based Suncor, enticed by the prospect of using its oil sands know-how and its worldwide rights in the extraction technology developed by an Alberta engineer to achieve production of 150,000 barrels per day, took a 50 percent operator role in Southern Pacific.

A 4,500 bpd demonstration plant was launched in 1999, in the face of strong environmental opposition.

In 2001, Suncor made a surprise exit, retaining only a 5 percent royalty interest, after recording a C$3 million write-off and an C$80 million write-down.

Last August, a Southern Pacific spokesman held out hope of producing 600,000 barrels in 2003 and a “breakeven” 1 million barrels in 2004.

But the company entered receivership after its largest shareholder, Texas-based Sandefer Capital Partners refused to make the second payment in a promised A$51 million investment.

Suncor, the last hope of a lifeline, said it will not exercise its options to buy shares in Southern Pacific, preferring to keep its focus on the Alberta oil sands.