Canada has staked its future on the oil sands. In November, Report on Business magazine together with Thomson Reuters examine what that means both at home and abroad. Read more from the issue at tgam.ca/oil.
In the early 2000s, energy companies from around the world lined up to buy chunks of Alberta's oil sands. Many of the foreign giants have since discovered what Canadian-based producers already knew – navigating regulatory requirements, constructing multibillion-dollar projects and expanding their output of gooey bitumen is complicated and expensive. Here are some of the major foreign investors and the status of their projects.
Royal Dutch Shell PLC (U.K./Netherlands)
In 2007, Shell applied to expand its Jackpine oil sands mine, and submitted documents for the Pierre River mine, a multibillion-dollar project that would produce 200,000 barrels a day of bitumen. The Jackpine expansion project, which Shell co-owns with U.S.-based Chevron Corp. and Marathon Oil Corp., won federal approval late last year, but the partners are still running the numbers to see if the 100,000-barrel-a-day expansion makes economic sense. Following Jackpine's regulatory approval, however, Shell halted its work on Pierre River, saying it had enough to do in the short term with Jackpine and a steam-assisted project called Carmon Creek. Company executives say that Shell is "opportunity-rich but capital constrained."
Total SA (France)
Total formed a joint venture with Suncor Energy Inc. in 2010 that brought together several oil sands assets with the aim of boosting efficiency. Competition from other crude oil sources, such as North Dakota's Bakken region, prompted the partners to pull the plug on the $11.6-billion Voyageur upgrading plant in Fort McMurray in May. This year, citing high costs, Total and Suncor also shelved the Joslyn oil sands mine, in which Japan's Inpex and Occidental Petroleum Corp. also have interests. But Total, Suncor and Vancouver-based Teck Resources are proceeding with the $13.5-billion Fort Hills oil sands mine; start-up is targeted for 2017.
Sinopec Corp. (China)
The state-owned producer and refiner bought ConocoPhillips's 9 per cent stake in the Syncrude Canada Ltd. joint venture for $4.7-billion in 2011. Canada's second-oldest oil sands mining operation is a steady source of cash flow, but the partners–including Canadian Oil Sands Ltd. and Imperial Oil–have struggled in recent years with unplanned equipment outages and extended maintenance shutdowns. The co-owners have pushed back major expansions until after the end of this decade.
Statoil ASA (Norway)
This year, Statoil severed a three-year-old oil sands partnership with Thailand's state producer, PTTEP. The two companies divvied up a large spread of acreage known as the Kai Kos Dehseh venture. Statoil assumed full control of the 20,000-barrel-a-day Leismer project and undeveloped one called Corner. PTTEP assumed ownership of three undeveloped leases: Thornbury, Hangingstone and South Leismer. In September, Statoil decided not to go ahead with multibillion-dollar Corner, blaming surging costs and limited access to export markets.
CNOOC Ltd. (China/Canada)
The state-owned Chinese company's $15.1-billion (U.S.) takeover of Calgary-based Nexen Inc. in 2012 was its biggest acquisition. The deal's centrepiece was Nexen's Long Lake, Alta., project, which has billions of barrels of bitumen reserves but has had a disappointing operating record since starting up in 2009 – production averaged 24,000 barrels a day in 2013, according to the company's website, less than half the proposed capacity of 72,000. CNOOC also has a 12.8 per cent stake in MEG Energy Corp., one of the more successful developers of steam-assisted oil sands production.
Sunshine Oil Sands Ltd. (China)
The small oil sands developer, backed by several major Chinese institutional investors, diverged from the pack in 2012 when it went public in Hong Kong before listing in Toronto. By the summer of 2013, with only about 80 per cent of its West Ells project completed and costs soaring, it ran out of money. Its major investors refused to advance more funds, forcing Sunshine to down tools for a year. After several equity issues and a big high-yield debt offering, it resumed work in September.