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Suncor CEO Steve Williams.

LARRY MACDOUGAL/The Canadian Press

Suncor Energy won't say much about the future of its ambitious plans to develop its Voyageur upgrader, but on a conference call Wednesday management made one thing clear: it's an all-or-nothing decision.

"At this stage in a project of this size, there is no easy way of going to a half or quarter size," chief executive officer Steve Williams said.

To date, Suncor's already spent $3.5-billion of the total expected $11.6-billion project cost, but no one's been able to determine whether the oil sands giant would sink more money into the project. For months, management has floated concerns about its economic viability. Last quarter, Mr. Williams noted that internal modelled returns were "struggling versus our hurdle rates," meaning Suncor wasn't expecting to earn more than the cost of developing the project.

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The latest $1.5-billion writedown proves just how much harder Suncor expects it will be to break even and analyst Kyle Preston at National Bank Financial noted that this is a "sure sign the project will get cancelled."

Like so many other global refiners, Suncor's been hit by the growing shale oil boom, particularly in the U.S. For the longest time heavy oil sands crude was viewed as the only long-term energy option, but a new abundance of light oil coming out of places like North Dakota is cutting into the margins from upgrading heavy oil.

As Reuters pointed out last summer, petroleum economists expect margins at oil processing plans could fall by 30 to 40 per cent over five years as more plants are built. The problem for Suncor is that it can't make the decision to scrap (or keep) the project all by itself. Total E&P Canada is a partner, and Mr. Williams said Wednesday that the decision-making process is much harder for Total to work through.

He couldn't say much before the formal decision is made before the end of the first quarter, but he did say this: "For Suncor, because we have assets on the ground, we have the capability of marketing all the bitumen from our growth plans without Voyageur." He then suggested that Total doesn't have that luxury.

Take from that what you will.

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