Suncor Energy Inc. chief executive Rick George figured his investors were uneasy about the risks of new Middle East and North African operations when the company acquired Petro-Canada in 2009, and with Sunday’s pullout from Syria that discomfort has been borne out a second time in less than a year.
Suncor shares sank 2.65 per cent on Monday as investors weighed the Calgary-based company’s retreat from a $1.2-billion Syrian gas project with no indication of any financial recourse. It came as Libyan operations recovered from a shutdown in that country early this year due to the civil war.
“I don’t think it will be something where they will have any near-term recourse, so while sanctions are in place this will be offline and who knows how long that will be?” said Michael Dunn, an analyst with FirstEnergy Capital Corp.
Before this year, some investors had speculated the Libyan and Syrian assets could be candidates for sales as their production and strategic value rose, especially after Mr. George singled them out as being outside Suncor’s normal risk tolerance. But the uncertainty that had enveloped them as unrest grew in both countries squelched such talk.
Suncor said on Sunday it made the decision to declare force majeure for the Ebla field – essentially breaking contract terms due to uncontrollable circumstances – to comply with tough new European Union sanctions on Syria.
On Monday, as voting began in local elections in Syria, security forces battled pro-opposition army defectors in clashes that are starting to eclipse a campaign of peaceful protests against President Bashar al-Assad, raising fears that Syria is drifting into civil war.
Suncor, which is better known for its sprawling oil sands operations in Alberta, said it is pulling out expatriate staff, though it did not provide numbers, citing security reasons.
“They’ll all be out within a couple of days, and there are far more Syrian national staff than there were expat staff,” spokeswoman Kelli Stevens said.
Ms. Stevens said there is no indication yet what the eventual outcome might be for the asset, which produces about 80-million cubic feet of gas a day for electricity generation in the domestic market. Its partner is Syria’s state-owned General Petroleum Corp.
“It means we can no longer support or have dealings with GPC, or with the joint venture that Suncor and GPC each own 50 per cent. We can continue to support our people, we can continue to support any solely Suncor interest,” she said.
“Would we go back in the future? Obviously we have to see what the future looks like and if we can return safely and in compliance with sanctions.”
Fears about the project with the political situation worsening in Syria were already partly factored into Suncor’s stock price, Mr. Dunn said.
The production represented about 3 per cent of Suncor’s total, but its returns were lucrative as it was priced at levels closer to oil than North American gas, he said.
“It’s not overly material from a production or financial perspective, but certainly it’s not negligible,” Mr. Dunn said.
In July, Suncor was forced to write down the value of its Libyan holdings by $514-million after it shut operations during the civil war that forced Moammar Gadafi from power. Operations, which had been producing 35,000 barrels of oil a day, are resuming there now.
That allowed Suncor to stand pat on its production forecast for 2012, as the Libyan output should make up for the loss in Syria, the company said on Sunday.