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