Fund­ing dis­pute

To­tal and Sun­cor in bat­tle over $17-bil­lion Fort Hills oil­sands project

The Guardian (Charlottetown) - - BUSINESS - BY DAN HEAL­ING

French oil gi­ant To­tal and Sun­cor En­ergy are in a dis­pute over fund­ing the Fort Hills oil­sands project, the $17-bil­lion de­vel­op­ment set to be­gin pro­duc­tion later this year.

The stand­off is not ex­pected to af­fect the over­all cost or sched­ule of Fort Hills. Still, Steve Wil­liams, CEO of Fort Hills op­er­a­tor Sun­cor En­ergy (TSX:SU), told fi­nan­cial an­a­lysts on a con­fer­ence call Thurs­day that he’s “dis­ap­pointed.”

“Our part­ner, To­tal, has cho­sen not to ap­prove or pro­vide ad­di­tional project sanc­tioned fund­ing for the Fort Hills project and as a re­sult we are now in the early stages of a com­mer­cial dis­pute with To­tal,” he said.

“Given the fact the con­struc­tion is now 92 per cent as of the end of July, we’re not an­tic­i­pat­ing that this is­sue will im­pact the plan to achieve first oil by the end of the year.”

In an email, To­tal said it won’t ac­cept “sub­stan­tial cost in­creases” in Fort Hills.

In Fe­bru­ary, Cal­gary-based Sun­cor said de­lays caused by last year’s wild­fires, along with con­struc­tion changes to boost ca­pac­ity, had added $1.4 bil­lion to $1.9 bil­lion to the es­ti­mated cost of Fort Hills, tak­ing the to­tal to as much as $17 bil­lion.

The project is owned 50.8 per cent by Sun­cor, 29.2 per cent by To­tal and 20 per cent by Van­cou­ver min­ing firm Teck Re­sources (TSX:TECK.B). Teck also ac­knowl­edged the fund­ing dis­pute in its earn­ings re­port is­sued Thurs­day.

On Wed­nes­day, Sun­cor re­ported it would in­crease its cap­i­tal spend­ing this year from about $5 bil­lion to $5.5 bil­lion in part so that work at Fort Hills bud­geted for 2018 can be com­pleted this year.

The in­crease also in­cludes about $100 mil­lion in re­pair costs fol­low­ing a fire at the Syn­crude oil­sands mine up­grader in March, some of which is ex­pected to be re­cov­ered through in­sur­ance. Sun­cor owns 54 per cent of Syn­crude.

To­tal has been re­duc­ing oil­sands com­mit­ments for years and sold a 10 per cent stake in Fort Hills to Sun­cor in 2015.

A year ear­lier, it agreed with part­ners to shelve the pro­posed $11-bil­lion Joslyn oil­sands mine and sold its 49 per cent stake in the stalled Voyageur oil­sands up­grader to Sun­cor.

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