Total: May Delay Joslyn Oil Sands Proj Decision To Cut Costs
* APRIL 6, 2009, 1:17 P.M. ET
OTTAWA (Dow Jones)--Total SA (TOT) may delay its investment decision for the proposed C$9 billion Joslyn oil sands mine in northern Alberta by a few months as it looks to cut project costs, the company said Monday.
The French oil major holds a 74% interest in the oft-stalled development and had previously intended to make a go-ahead decision in early 2010.
"It's something that may be pushed back a couple of months," spokesman Kevin Church said. "We're looking at costs...and design and discussing these issues with our contractors."
Developing Alberta's vast oil sands resource - the biggest hydrocarbons basin outside Saudi Arabia - is an expensive process with major up-front capital costs. But as oil prices sank more than 70% and North America's economy seized up at the end of last year, a number of proposed projects have been delayed or cancelled, relieving some of the inflationary pressure. Several companies are now rethinking their oil sands plans to take advantage of lower costs.
"Part of the strategy (in delaying the investment decision) is talking to suppliers as the cost of raw materials has come down, to get the best deal," Church said.
Total has been forced to revise the schedule for the Joslyn mine several times due to regulatory delays and heavy competition for labor and materials during the recent industry boom. The first 100,000-barrel-a-day phase was originally slated to come onstream by 2010, but the company is now looking at a 2014 startup. A second development phase could double output.
There is already a small production facility at the Joslyn site, where steam is used to pump out the sludgy oil sands bitumen instead of being mined. However, production here has been stopped since it failed to reach 10,000-barrel-a-day capacity, Total said in its annual report released Friday.
"Both the mothballing of this site's facilities and the possible complete removal of assets from this site are being studied," the report said.
The company has amassed sizeable oil sands assets in Alberta, though actual production is relatively minor. In January, Total launched a C$617 million hostile bid for would-be oil sands developer UTS Energy Corp. (UTS.T), whose board has rejected the offered price as "inadequate."
Total's chief executive, Christophe de Margerie, has said the company doesn't want to increase the C$1.30-a-share bid "at the moment," and recently extended the bid to April 16.
Total also owns 50% stakes in the proposed Northern Lights project - a joint venture with China Petroleum & Chemical Corp. (SNP), or Sinopec - and Surmont, its only producing asset with ConocoPhillips (COP).
