Sinopec increases oilsands stake in Northern Lights mine

In a deal that reflects the increasingly multinational face of the oil-sands, Chinese oil major Sinopec increased its stake in the proposed Northern Lights oilsands mine to become an equal partner in the project with Paris-based Total.
After acquiring an additional 10 % of the Northern Lights partnership for an undisclosed sum, the Chinese refiner will control 50 % of the project.

"This change to the Northern Lights partnership will be an opportunity to engage in closer efforts with Sinopec to develop the oilsands resources that will be necessary to help fulfil energy needs for the next decades, and to establish access to markets in North America and Asia," said Yves-Louis Darricarrere, the head of Total's exploration and production arm.
"Essentially it's a balancing of the partnership with Sinopec," said Total Canada spokeswoman Elizabeth Cordeau-Chatelain. Total remains operator of the project, she added.

Sinopec is China's largest integrated oil company and the 15th-largest corporation in the world by revenue, according to Fortune magazine. By comparison, Total ranked sixth. Sinopec gained its initial interest in the project by paying Synenco Energy $ 105 mm in 2005. Total, in turn, bought the troubled oilsands developer in the spring of 2008 for $ 480 mm.
Prior to the Synenco sale, estimates pegged the cost of the Northern Lights mine and accompanying upgrader at about $ 10 bn.

The Chinese government has been rumoured to be interested in gaining more access to Canadian oilsands reserves as part of a strategy to secure its growing energy needs.
Last September, it paid $ 1.9 bn to buy Calgary-based Tanganyika Oil, whose main assets are located in Syria. Oil was trading around $ 90 US a barrel at the time, well on its way to $ 35.

In February, it was reported that the Chinese government is looking to triple the size of its strategic petroleum reserves to take advantage of lower oil prices at a time when Canadian pipeline operator Enbridge put the delayed Gateway pipeline to the West Coast back on the front burner.
Wenran Jiang, who heads the University of Alberta's China Institute, insists the Chinese government continues to move ahead with an ambitious suite of policies meant to increase the country's energy infrastructure and diversify its supply sources and overall energy mix, including coal, electricity and natural gas, in concert with its recently announced $ 600-bn stimulus package.

Surging Chinese demand has been blamed for pushing oil prices to record highs near $ 150, but in a recent paper for the Washington based Jamestown Foundation, Jiang noted China's oil stockpile is only large enough to meet 30 days of consumption, compared to three months for the US government's own strategic reserve.
For Total, the Sinopec deal is the latest in a series of moves to consolidate its Canadian oilsands holdings. Earlier, the company's Canadian subsidiary extended its hostile $ 680-mm takeover bid for Calgary-based UTS Energy and continues to press ahead with the Joslyn mine, where it holds a 74 % interest.

Total also holds 50 % of the Surmont thermal project in concert with ConocoPhillips, which is currently producing 18,000 bpd. In addition, the company said it has initiated engineering studies for a 150,000-bpd upgrader to be built near Edmonton. Pending regulatory approval for the Joslyn mine, the upgrader could be up and running by 2015.
In other news, Total asked for permission from the Energy Resources Conservation Board to shut down the existing 2,475 bpd in-situ oilsands plant at Joslyn. The Joslyn plant was built by Deer Creek Energy, which was sold to Total in 2005 for $ 1.35 bn.