Oil supermajor drops out of Canadian tar sands project

Total SA, a French oil supermajor, will sell its 49 percent stake in a Canadian oil sands project. The sale raises questions about whether the controversial Keystone XL pipeline project is really in the US’ interests, Alic writes.

By , Guest blogger

  • close
    The French oil giant Total SA headquarters is seen at La Defense business district, west of Paris. Total's divestiture from an oil sands project raises questions about the long-term viability of Canadian oil sands investments, Alic writes.
    View Caption

France’s Total SA (NYSE: TOT) will sell its 49% stake in its Canadian oil sands project to Suncor Energy Inc. for $500 million, netting the French oil giant a $1.65 billion loss on the beleaguered project.

Total would have had to spend another $5 billion (at least) on the Alberta oil sands Voyageur Upgrader project over the next five years—an investment that cannot be justified according to its executives.

The project is beleaguered by increasing labor costs, a shortage of labor and the falling prices of Canadian heavy crude against rising US oil production. Profit margins have narrowed to the extent that the project is no longer economically feasible.

Recommended: Fracking. Tight oil. Do you know your energy vocabulary?

The sale to Canada’s Suncor (NYSE: SU)—from which Total purchased the project in 2010--and the resulting loss hasn’t affected Total shares to any significant extent as of the time of writing. These net losses won’t be reflected until Total releases its first quarter 2013 results. 

Not only does the Total divestiture raise questions about the long-term viability of Canadian oil sands investments, it also raises questions about whether the controversial Keystone XL pipeline project is really in the US’ interests—at a time when US oil output is rising and Canada’s oil sands are becoming less strategically advantageous.

Total is still hanging on to two other oil sands projects in Canada—at Fort Hills and Joslyn—and for now there is no talk of divesting, but later this year Total will make a final decision on its Fort Hills investment, according to Bloomberg.

Original source: http://oilprice.com/Energy/Energy-General/Total-Dumps-Canadian-Oil-Sands-Project-for-1.65bn-Loss.html

The Christian Science Monitor has assembled a diverse group of the best energy bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

Share this story:
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...