Globe & Mail: “The Joslyn oil sands mine has been shelved indefinitely, a result of rising industry costs that made the $11-billion project financially untenable.”
“French energy powerhouse Total SA, along with its partners in the Joslyn north oil sands project, unanimously decided to put the project on hold because of rising cost pressures across the entire energy industry, said André Goffart, the head of Total’s Canadian division.
“Joslyn is facing the same challenge most of the industry world-wide [is], in the sense that costs are continuing to inflate when the oil price and specifically the netbacks for the oil sands are remaining stable at best – squeezing the margins,” he told reporters in a conference call.
“We are still in the cycle within this industry where cost inflation in general is going much faster than price adjustments. We know that there is a rebalancing that needs to be done.”
Major energy players have addressed a variety of industry challenges in recent years by becoming more selective with spending, developing projects in smaller chunks or postponing work in a bid to improve financial returns. Rising costs for labour and materials have long worked against the economics of new projects, and limited pipeline access to ship oil has weighed on prices for Alberta oil. Total is signed up to ship oil on three major undeveloped pipeline projects facing uncertainty: Keystone XL, Northern Gateway and the Trans Mountain expansion.
….Joslyn has faced troubles before. Part of the development was originally designed to use wells rather than trucks and shovels in order to extract bitumen. That idea was abandoned when an overpressurized well blew up, creating a crater.
“I thought they would have stopped the project then,” said Laura Lau, a senior vice-president and portfolio manager at Toronto’s Brompton Funds. “But no. More good money after bad. Good money after bad.”
….Suncor and Total in 2013 officially killed plans to proceed with their $11.6-billion Voyageur upgrader project because of rising costs, hoping it would be more profitable to ship unprocessed bitumen.
….Total’s Mr. Goffart would not say how much money has been spent on the Joslyn joint venture. Roughly 150 jobs in Total’s Canadian division will be affected by the decision, he said, but the company will try to find places elsewhere in the company for some of those employees.”
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