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Syncrude (MARK RALSTON/Mark Ralston/AFP/Getty Images)
Syncrude (MARK RALSTON/Mark Ralston/AFP/Getty Images)

Conoco mulls Syncrude sale Add to ...

ConocoPhillips Co. , the No. 3 U.S. oil company, said Wednesday it may sell its 9 per cent stake in the Syncrude Canada Ltd. oil sands project, part of a $10-billion (U.S.) asset sale that may also include pipelines, terminals and natural gas assets in North America.

The comments, made by ConocoPhillips chief executive officer Jim Mulva on the company's third-quarter earnings call, were the first details the company has provided since Oct. 7, when it said it planned to shed operations to cut debt.

"[Syncrude]is a good investment, but we think that there is plenty of interest," Mr. Mulva told investors.

Syncrude, located north of Fort McMurray in northern Alberta, is the world's largest oil sands mining and synthetic crude processing operation. Output averaged 340,000 barrels a day last month.

ConocoPhillips squelched talk, however, that it may also unload part of its 20 per cent interest in Russia's Lukoil . The asset sale program includes none of that stake.

"We intend to maintain a strategic relationship with Lukoil," he said.

Based on the market value of Canadian Oil Sands Trust , Syncrude's largest partner with 37 per cent, Conoco's stake would be worth about $3.6-billion (Canadian).

Canadian Oil Sands has been speculated as a logical buyer. Its CEO, Marcel Coutu, has said the trust may be interested in consolidating more interests.

But Canadian Oil Sands spokeswoman Siren Fisekci declined to say if the trust will launch a bid.

"We've been consistent about looking at interests should they become available, but I can't comment on specific ones," Ms. Fisekci said.

Chinese and South Korean state oil companies are also considered potential bidders. They have been investing heavily in Canada's oil sands, which represent the largest crude deposits outside the Middle East, as they look to secure energy assets around the world to help fuel their growing economies.

Last week, Korea National Oil Corp. announced the $1.8-billion acquisition of Harvest Energy Trust. That deal followed PetroChina's $1.9-billion takeover of interests in two oil sands projects in August.

FirstEnergy Capital Corp. analyst William Lacey said he was puzzled by ConocoPhillips' decision to jettison Syncrude, especially now that expansion spending is over at the plant and the partners appear to have ironed out some reliability problems.

"These are big-company assets and big companies typically like them because they have a lot of different production streams they are managing around the world and it's nice to have one that is a pretty steady source of cash flow," Mr. Lacey said. "It's more of an annuity at this point."

The other Syncrude partners are Imperial Oil Ltd. , Suncor Energy Inc. , Nexen Inc. , Murphy Oil Corp. and Nippon Oil Corp. unit Mocal Energy.

Apart from Syncrude, Conoco's oil sands holdings include a producing and refining joint venture with EnCana Corp. , which operates the Foster Creek and Christina Lake, Alta., steam-driven projects. Conoco also has a 50 per cent interest in an oil sands development called Surmont.

North American assets Conoco has earmarked for sale represent the "bottom 10 per cent" of its exploration and production position, it said.

The refining market is currently weak, but Conoco said it would sell less sophisticated, less competitive refineries in 2012 and 2013 if the market recovers.

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