Suncor Energy Inc., Calgary, has agreed to acquire 10% working interest in the Fort Hills oil sands project from Total E&P Canada Ltd. for $310 million (Can.), or $230 million (US). The deal is expected to close by yearend.
The $15-billion, 180,000-b/d project is in Alberta’s Athabasca region, 90 km north of Fort McMurray. Construction activities are 40% complete, and start-up is expected by yearend 2017.
Suncor also will acquire a further proportionate interest in Fort Hills related logistics, including pipelines, storage terminals, and third-party pipeline capacity agreements.
As a result of the deal, Suncor’s incremental capital increase to Fort Hills is estimated at just more than $1 billion, of which $700 million is remaining project spend.
Suncor says the acquisition of the additional working interest also presents an opportunity for the company to lower its capital cost per barrel and enhance its projected return on the Fort Hills project.
Meanwhile, Arnaud Breuillac, Total’s exploration and production president, commented on the deal from his company’s perspective, “As a result of a full comparative analysis of its global asset portfolio in the context of lower oil prices, Total has decided to reduce its exposure to Canadian oil sands projects.
“Following the suspension of the Joslyn project at the beginning of 2015, the sale of this minority interest will reduce our capex outlay in the Fort Hills project by over $700 million [(Can.)]—about $530 million [(US)]—from now until end-2017, and help us deliver on our global capex reduction target,” Breuillac said.
Following completion of the deal, Fort Hills Energy LP’s partners will comprise Suncor with 50.8% working interest, Total E&P Canada Ltd. 29.2%, and Teck Resources Ltd. 20.0%. Suncor is the developer and operator of the Fort Hills project through an operating services contract.