Canada's Suncor Energy said on Thursday that one of its project partners in the Fort Hills oil sands project in Alberta, France's oil major Total SA, had decided not to approve or provide additional financing for the project, setting the stage for a commercial dispute between the companies.
Suncor, Total, and Teck Resources Limited are co-owners of the project operated by Suncor that is scheduled to produce first oil by the end of the fourth quarter this year and achieve 90 percent of its planned production capacity of 194,000 bpd within 12 months.
While Suncor confirmed on Wednesday that Fort Hills is on track to achieve first oil by the end of 2017, its president and chief executive officer Steve Williams declined on Thursday to elaborate on details of the dispute with Total but said: "We know that they have been looking at various strategies, but in this case, this is a commercial discussion between ourselves and Total," The Globe and Mail reports.
Separately, Total said in its Q2 results release today that an impairment related to the Fort Hills project following an announced cost increase was one of the adjustments adversely affecting Total's net income in the first half of 2017.
In a call following the results release, Total's chief financial officer Patrick de la Chevardiere told analysts, as carried by Reuters:
"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."
"Despite the dispute, we are in discussion with Suncor to reduce costs," de la Chevardiere noted.
Total's reluctance to commit more funds to the Fort Hills project comes after international oil majors - including Shell, ConocoPhillips, and Statoil - sold assets in Canada's oil sands, considered to be one of the most expensive projects to develop, especially in the current oil price environment.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More