Total Sees Decision on Fort Hills in 4Q; Books Pipeline Space

Total SA is moving forward with Suncor Energy Inc. on a Fort Hills, Alberta, oil-sands joint venture while scrapping plans for an upgrader, and expects to make a final investment decision late this year.

In preparation, Total has secured space on three new Canadian oil export pipelines -- Enbridge Inc.’s Northern Gateway, Kinder Morgan Energy Partners LP’s Trans Mountain expansion and TransCanada Corp.’s Keystone XL, said Andre Goffart, president and chief executive of Total E&P Canada Ltd.

“We can develop Fort Hills” and a proposed oil-sands mine called Joslyn without upgrading, Goffart said today in a telephone interview from Calgary. “For both projects, our intention is to dilute the bitumen and send it into the market, and we are taking positions on various pipelines.”

A decision whether to proceed with Fort Hills had been scheduled for the end of the third quarter, Suncor Chief Financial Officer Bart Demosky told investors at a conference in New York on March 14. If built, its first phase would produce as much as 164,000 barrels a day in 2017. Suncor owns a 40.8 percent stake in Fort Hills, Total owns 39.2 percent and Teck Resources Ltd. owns 20 percent.

Goffart said an investment decision on the Joslyn project, near Fort McMurray, Alberta, wouldn’t happen this year.

Results Encouraging

“We’re still working on optimization, and so far we’ve had encouraging results, so we are very optimistic,” he said. Joslyn is expected to produce 100,000 barrels a day starting in 2018. Total is the majority owner, with Suncor holding a 36.75-percent stake.

Total expects to spend C$15 billion ($14.8 billion) on energy projects in Canada through 2020 and to be producing 200,000 barrels of bitumen a day by then, Goffart said.

Suncor and Total announced yesterday they had canceled plans to build the Voyageur upgrader, which had been intended to convert heavy bitumen production from Fort Hills and Joslyn into 200,000 barrels a day of synthetic light oil. A rapid increase in competing light oil production from U.S. shale basins eroded the economics of the upgrader plans, the companies said.