Tectonic Metals gets funding for gold exploration in Alaska
The company's Flat gold project is located 40 km north of the giant Donlin gold project.
Alberta oil sands | Creative Commons image by Howl Arts Collective
French energy powerhouse Total SA, along with its partners in the Joslyn north oil sands project, unanimously decided Thursday to mothball the mine, as escalating costs made the $11-billion endeavour financially untenable.
In a conference call, the head of Total’s Canada André Goffart said Joslyn was facing the same challenge most of the industry worldwide.
“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,” he told reporters.
There were no indications as to whether the ownership structure of Joslyn, located northwest of Fort McMurray, would change. Currently, Total is operator with a 38.25% stake. Suncor Energy (TSX:SU) holds a 36.75%, Occidental has 15% and Inpex 10%.
The oil sands project has been a difficult one since Total acquired it as part of its Cdn $1.7 billion purchase of Deer Creek Energy in 2005. It went through a lengthy regulatory process but ended up being put on the back burner when the company entered a joint venture with Suncor to develop the Fort Hills mine.
The price tag of the project, finally approved 2011, was most recently set at $11 billion. It had aimed to start producing 160,000 barrels a day toward the end of the decade.
For Alberta-born analyst Nelson Smith the news is important to investors because it symbolizes how much of a problem cost overruns are for oil sands producers.
“Oil sands workers are paid two to three times what regular workers are paid for the same job. It’s not uncommon to see ambitious workers make more than $200,000 per year after tax. There are stories about people heading up to the oil sands as 22-year-old fresh graduates and coming back five years later as millionaires.
“And yet, even after all those efforts, oil sands producers are still having problems attracting staff,” he writes for The Motley Fool.
The Joslyn asset covers an area of just over 221 square kilometres. (Courtesy of Total)
Total retains significant oil sands investment, but it is in a tough position. The firm is committed to ship oil on three major undeveloped and uncertain pipeline projects: Keystone XL, Northern Gateway and the Trans Mountain expansion.
