National Post (National Edition)
$20 BILLION
Frontier would produce 260,000 bpd
TECK RESOURCES MOVES AHEAD WITH HEARINGS FOR ITS MASSIVE FRONTIER OIL SANDS PROJECT.
CALGARY • Fresh off a ribbon-cutting ceremony for the $17-billion Fort Hills oilsands project, Teck Resources Ltd. is moving ahead with its next major oilsands investment.
Beginning today, Vancouver-based Teck will have a team in Fort Mcmurray for a five-week, joint-review panel regulatory hearing by the Canadian Environmental Assessment Agency and Alberta Energy Regulator into its wholly owned 260,000bpd Frontier oilsands mine — a massive greenfield project north of Fort Hills.
Teck CEO Don Lindsay was in Fort Mcmurray earlier this month to officially open the 194,000-barrels-per-day Fort Hills oilsands mine, in which his firm has a 21.3-percent stake. Suncor Energy Inc. and Paris-based Total SA own 54.1 per cent and 24.6 per cent respectively.
The new project could be a financial stretch. Frontier carries an estimated $20-billion price tag, which would make it slightly more expensive than Teck’s own market capitalization of $18 billion.
Teck has indicated it wants to proceed with the project once it has regulatory approvals and aims to start producing oil from an 85,000bpd first phase in 2026, with a second phase 10 years later.
Analysts have speculated that the company could find a partner to finance Frontier’s massive capital costs, especially since Teck has sought partners for other mining projects after guiding those projects through the regulatory process. For example, it is seeking a partner for the $4.8-billion second phase of its recently approved Quebrada Blanca copper mine in Chile.
“Our current focus is on successfully advancing Frontier through the regulatory review process,” Teck spokesperson Chris Stannell said in an email.
“Any further decision around the project will depend on factors including the outcome of that process, market conditions and other considerations,” he said.
“This would include looking at partnership options. We have experience in partnerships to successfully develop oilsands projects through our involvement in the recently completed Fort Hills oilsands project, and this is clearly a strong option for advancing such projects.”
Given the current regulatory timeline, the company is currently tracking toward a final investment decision on Frontier by the middle of 2019, CIBC World Markets analyst Oscar Cabrera said in a research note.
Teck recently hosted Cabrera and other analysts at the Fort Hills oilsands project to demonstrate the production ramp-up and touted its ability to proceed with another oilsands project.
“We had a positive impression of the Fort Hills operation and it can become a key cash flow generator within Teck’s portfolio,” RBC Capital Markets analyst Stephen Walker said in a research note.
Teck is also marketing its own oil production from Fort Hills and has secured pipeline capacity to send 20 per cent to refineries in the U.S. Gulf Coast, home to the largest concentration of heavy oil refineries in the world.
“Clearly, additional pipeline capacity would benefit Teck and other producers in the area,” Walker said.
Ahead of this week’s hearings, Teck has been consulting with First Nations in the area to avoid the pitfalls of previous projects, which some Indigenous group have opposed.
Last week, the company signed an agreement with the nearby Athabasca Chipewyan First Nation, which had asked the Canadian Environmental Assessment Agency to conduct parts of the hearing in its community.
“We have had positive negotiations with Teck, and we believe that we have an agreement that respects our treaty right, and use innovative approaches to mitigate the impacts on our land, waters and wildlife,” Chief Allan Adam said in a release. It described the agreement as “a turning point” for the First Nation’s ability to determine its own future.