France's Total SA has had a rough ride in Canada.
The global energy giant has repeatedly stalled or cancelled major oil sands projects in Alberta, costing it millions along the way. It has blown a hole in the ground in a failed attempt to extract bitumen. It has pushed aside plans for two upgraders. And now, it is indefinitely deferring development of its Joslyn north oil sands mine.
Total's experience in the oil sands highlights two things: how difficult and costly the region can be for oil producers; and how energy companies are now more willing to cut their losses or more carefully develop projects.
Total's latest speed bump is its undeveloped Joslyn mine, which it shares with three partners, including Suncor Energy Inc., one of the most established players in the oil sands. On Thursday, Total said the project is too costly to develop, and officially put it on hold. André Goffart, the head of Total's Canadian division, declined to say how much the company has spent on Joslyn.
Robert Bedin, director of energy research at ITG Investment Research Inc.'s Calgary office, never found the blueprints for the $11-billion Joslyn mine attractive. Total's oil sand experience has been shaky, he said. "It doesn't sound very successful."
Total shares another project with Suncor: the undeveloped Fort Hills mine. While Fort Hills is viewed as a better project than Joslyn, Mr. Bedin still questions its viability. He estimates that oil would have to trade around $100 (U.S.) a barrel to make the project break even.
This is the second time Total has struggled with Joslyn. It previously put a crater in the ground there trying to extract bitumen using wells rather than mining. The in-situ plan was then canned.
Total and Suncor last year cancelled plans to build the $11.6-billion (Canadian) Voyageur upgrader. This meant the French company booked a loss of $1.65-billion (U.S.) in the first quarter of 2013. Total sold its stake in the project to Suncor for $500-million.
Total also iced an upgrader in Alberta before the Voyageur decision. It previously had plans to build a 295,000 b/d upgrader east of Edmonton.
Total was once viewed as a huge potential investor in Alberta. After it received regulator approval to build the now-stalled upgrader near Edmonton, law firm Ogilvy Renault (now part of Norton Rose Fulbright) said: "Over the next 10 years, Total Canada will make a $15-billion to $20-billion capital investment into Alberta's economy relating to the upgrader project. This is one of the largest investment projects in Total SA's history."