Suncor, Total SA dispute cost of Fort Hills oil sands project

Suncor says it is bringing some project spending slated for 2018 for the Fort Hills oil sands project into this year.  Fort Hills Energy photo.

Fort Hills 92 per cent complete, crude production to begin by end of 2017

France’s Total SA has told Suncor Energy is will not provide any more funding for the Fort Hills oil sands project, a joint venture between Suncor, Total and Teck Resources Ltd.

Earlier this year, Suncor increased its capital costs estimate for the 194,000 barrel per day (b/d) project to $16.5 billion-$17 billion from $15.1 billion.  On Wednesday, the Calgary-based company said it would bring forward some project spending that was budgeted for 2018 into this year, according to Reuters.

“Total has chosen not to approve or provide additional project sanction funding and as a result we are now in the early stages of a commercial dispute,” Williams told analysts on a second-quarter earnings call.

Suncor Chief Executive Steve Williams says the dispute is “frustrating”, but added the project is already 92 per cent complete and is expected to begin producing crude by the end of 2017.

Suncor is accelerating construction at Fort Hills, and is looking to finish up hydrotesting and other other facets of the project this year instead of 2018 as originally planned.

In 2015, Total sold a 10 per cent stake in the Fort Hills project to Suncor and earlier in the year, wrote off a portion of the oil sands project due to cost increases.

Speaking with analysts about Total’s second-quarter earnings, Total Chief Financial Officer Patrick de la Chevardiere said “Basically, we are not ready for a substantial cost increase in the Fort Hills mine from the operator, that is what has led to what is called a commercial dispute by Suncor who is the operator of the mine,” he said.

The  Courbevoie, France-based company is looking to reduce its exposure in the oil sands.

Despite the dispute, Suncor shares were up 1 per cent on the TSE Thursday.