Suncor cancels Voyageur upgrader, buys Total's stake

Suncor Energy Inc., Calgary, has scrapped plans for the Voyageur upgrader project near Fort McMurray, Alta., and has acquired partner Total E&P Canada Ltd.’s interest for $515 million.

The company said the decision “is the result of a joint strategic and economic review launched by Suncor and its joint venture partner Total E&P Canada in late 2012.”

Suncor Energy in February 2013 took a $1.487 billion net after-tax impairment against fourth quarter 2012 earnings. That charge resulted in a fourth quarter loss of $562 million, compared to a $2.65 billion profit in the fourth quarter of 2011.

After the writedown, the carrying value of net assets related to its Voyageur interest as of Dec. 31 was about $345 million (OGJ Online, Feb. 7, 2013).

On Wednesday the company said that as a result of not proceeding it also expects to incur charges to first quarter 2013 net income and cash flow from operations of $140 million and $180 million, respectively.

Steve Williams, president and chief executive officer, said, “Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project. That’s why we undertook a thorough review of the project to determine whether it met our criteria for long-term, profitable growth.

“This decision is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher-return growth projects and accelerating the return of cash to shareholders through dividends and share buybacks,” Williams said.

The Voyageur upgrader was to handle bitumen from the planned Fort Hills oil sands mine operated by Suncor and Joslyn mine operated by Total E&P Canada. It is to be able to process 296,000 b/d of bitumen and yield 218,000 b/d of synthetic crude oil.

The companies formed a joint venture in 2010 to share interests in the mines and upgrader and to develop the Fort Hills and Voyageur projects in parallel (OGJ Online, Dec. 20, 2010).