Total Warns of Possible Delay to Its Joslyn Oil Sands Project in Alberta
Total SA, Europe’s third-biggest oil producer, warned that the planned start of the Joslyn Creek Canadian oil sands project may be delayed by a year.
First production from Joslyn “will be 2017 or 2018,” said Jean-Michel Gires, Total’s president of Canadian exploration and production, in an interview in Montreal yesterday. Earlier this year, Total had said production would start in 2017.
Plans to start extracting oil at Alberta’s Joslyn Creek, where oil-soaked rocks and dirt will be mined near the surface, have sparked scrutiny from regulators and the ire of environmental groups such as Greenpeace. Alberta’s Energy Resources Conservation Board, an independent agency of the provincial government, has to approve the project.
“We don’t control the agenda,” Gires said. “The hearing process has started. Our best guess is that there will be a decision, once the permit has been obtained, at the beginning of 2012 for the start of this project.”
Total plans to produce as much as 250,000 barrels a day from its Canadian oil sands projects by 2020, buoyed by its recent purchase of UTS Energy Corp.
The purchase of Calgary-based UTS, which was announced in July, will give Total a 20 percent stake in the Fort Hills mining project, also in the Athabasca region in Alberta. The open-pit mine contains about 3.4 billion barrels of bitumen and is estimated to produce about 160,000 barrels a day by 2016. The project is 60 percent-owned by operator Suncor Energy Inc., and the remaining 20 percent is held by Teck Resources Inc.
Surmont
Total’s output from the Canadian oil sands will also be boosted by its development with ConocoPhillips of Surmont, southeast of Fort McMurray, where production will be ramped up to 110,000 barrels a day from 27,000 barrels a day by 2015, according to the companies’ plans. Total produced 8,000 barrels of oil a day last year from 50 percent-owned Surmont.
“We are trying to build our position in Canada based on the long-term bet” that energy demand will outstrip supply, Gires said. “Our Canadian operations aren’t affected by current oil prices. In the long term we expect oil prices to pick up.”
Crude oil prices need to be at least $80 a barrel to justify investments in projects in Alberta, Total’s Chief Executive Officer Christophe de Margerie has said. Crude for October delivery traded at $76.61 a barrel today in electronic trading on the New York Mercantile Exchange.
Total has said it is considering divesting some of its stake in the Joslyn mining project. The company will remain the operator of the project with an interest of about 50 percent.
“This implies that Fort Hills is the superior quality resource, and it seems that Fort Hills is closer to the core of the Athabasca oil sands area,” Sanford C. Bernstein & Co. said in an Aug. 24 report. The French oil company’s oil sands acquisitions are “an unsuccessful piece of business for Total at this stage” and shareholders won’t see significant profit from earlier deals “for some years to come” without significant investment, it said.
Alberta’s oil sands contain the biggest crude reserves outside of Saudi Arabia, according to Canadian government estimates.
To contact the reporters on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net. Tara Patel in Paris at tpatel2@bloomberg.net
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