Skip to main content
Open this photo in gallery:

Suncor Energy is increasing its stake in the oil sands with an aquisition of the Canadian operations of TotalEnergies.CHRIS WATTIE/Reuters

Suncor Energy Ltd. SU-T is set to increase its footprint in the oil sands, with a $5.5-billion acquisition of the Canadian operations of TotalEnergies TTE-N, including the French company’s remaining stake in Fort Hills, and a share of the Surmont project, both in northern Alberta.

The deal, announced late Wednesday, underscores the continuing Canadianization of the oil sands. Years of market volatility and an increasing focus on environmental goals – particularly among European players – has foreign companies looking to rid their portfolios of high-emissions projects and non-core assets. This has created buying opportunities in Alberta, which Canadian energy producers have seized upon.

Paris-based Total announced in September that it planned to spin off its Canadian assets, in part because they didn’t fit with the company’s low-emissions strategy.

Among several unsolicited offers it received was one from Calgary-based Suncor, which made a pitch to buy the entirety of TotalEnergies EP Canada for $5.5-billion in cash. Under the deal announced Wednesday, Suncor could make additional payments of up to $600-million, depending on production and the price of oil.

Suncor’s offer was comparable to Total’s own $5-billion to $6-billion valuation, Total’s chief executive, Patrick Pouyanné, told an investor call Thursday morning. It was also “a straightforward way to divest the assets, as we are planning to do it straight away.”

The deal will add about 135,000 barrels per day of bitumen production capacity to Suncor’s oil-sands portfolio, as well as 2.1 billion barrels of proved and probable reserves.

Rich Kruger, Suncor’s president and chief executive officer, said in a statement that scooping up Total’s Canadian assets represents a “major step” toward securing a long-term bitumen supply for the upgrader facilities at Suncor’s Base Plant in Fort McMurray, which transform bitumen into synthetic crude.

“These are valuable oil-sands assets that are a strategic fit for us,” Mr. Kruger said.

Suncor has been grappling with uncertainty related to a planned extension of its Base Mine oil-sands project, with potential federal emissions policies raising questions about the project’s viability.

In addition to 100-per-cent ownership of Fort Hills, the Total deal will give Suncor a 50/50 working interest in the Surmont oil-sands project, with ConocoPhillips Canada Ltd. This will bring the company a long way toward plugging a potential supply gap for its upgrader operations.

With that and its Firebag and MacKay River assets, Suncor will have enough bitumen supply in the Fort McMurray region to make full use of its Base Plant upgraders past the end of the Base Mine’s lifetime, which is expected to be in the mid-2030s.

Thomas Liles, an analyst at research firm Rystad Energy, said the Total-Suncor deal has been a long time coming.

“Now that we’re post-COVID and seeing higher prices, it’s a more opportune time for foreign players to divest,” he said.

While several U.S. companies still have investments in the oil sands, Total’s exit leaves Shell RYDAF as the only major European producer with a notable stake in the region, through its investment in the Athabasca Oil Sands project. But Shell’s share of that project has shrunk to 10 per cent.

The oil price crash in 2014-15 kicked off a period of foreign divestment from the oil sands, Mr. Liles said. The trend accelerated around two years later with another flurry of deals, including Norwegian Statoil ASA’s sale of its stake in the region, and Shell’s divestment of its undeveloped oil-sands assets.

“Globally, it’s definitely something that we would expect after these bouts of market volatility, where majors are always divesting non-core assets and really tightening up their portfolios,” Mr. Liles said.

And while emissions-reduction targets weren’t hugely relevant five years ago, that has shifted. The world’s largest oil companies are now setting ambitious, long-term decarbonization goals.

Jonah Resnick, a senior research analyst at the data firm Wood Mackenzie, said both Suncor and Total are getting what they need out of the deal.

Total gets a “significant reduction” in its carbon footprint by shedding its two most emissions-intensive assets, he said, while Suncor gets to fill a large supply gap for its operations.

Mr. Resnick said that even though the deal represents a significant amount of capital for Suncor, “the cost to build comparable projects would have been more.”