UTS eyes Fort Hills options as Suncor joins group
Tue Jun 16, 2009
By Jeffrey Jones
CALGARY, Alberta, June 16 (Reuters) - UTS Energy Corp (UTS.TO) has begun to plot out new ways to develop the delayed Fort Hills oil sands project but decisions must wait until Suncor Energy Inc (SU.TO) closes its takeover of the operator, Petro-Canada (PCA.TO), UTS's chief executive said on Tuesday.
UTS, which has a 20 percent interest in the Alberta oil sands development, sees cost advantages in shifting some of the processing to Suncor's massive northern Alberta operations, CEO Will Roach said.
But he has had no detailed discussions with Suncor on the project, one of several that were shelved when the industry downturn took hold in 2008.
Suncor Chief Executive Rick George has said he expects to examine all of Petro-Canada's assets after the C$22 billion ($19.5 billion) takeover is completed.
"First of all, we've got to understand where the project fits into the combined portfolio, and obviously we're pretty excited to see the pre-eminent oil sands operator take over the project," Roach told reporters after speaking to an oil industry investor conference.
"There's a lot of opportunity here but we don't really know how this is going to pan out until they actually get in the driver's seat and take one to two quarters to sort out what they want to do."
Petro-Canada put Fort Hills on hold late last year as oil and credit markets sputtered. That, and a multibillion-dollar jump in construction cost estimates a few months earlier, sent UTS stock tumbling.
In January, French oil major Total SA (TOTF.PA) launched a hostile bid for UTS, but ultimately failed to garner enough support from investors.
Petro-Canada, UTS and the project's other partner, Teck Resources Ltd (TCKb.TO), have spent the last six months working on ways to cut the cost of the 160,000 barrel a day project.
Roach has said the cost of the current mine and bitumen extraction plan has since dropped by C$5 billion to around C$8 billion.
He posed a series of possible scenarios for moving forward with the project, including initially developing just one 80,000 barrel a day production train in the mine.
Based on several oil price and exchange rate assumptions, the internal rate of return could range between 11 percent and 32 percent.
In one scheme, mining and primary bitumen extraction could take place at the Fort Hills site and treatment of the frothy bitumen that gets upgraded into synthetic oil could be done at the Suncor site, he said.
Roach said UTS has had discussions with other companies since Total dropped its bid, as part of "normal business", but he declined to say if any involved his company or various assets being acquired.
UTS shares were up 1 Canadian cent at C$1.65 on the Toronto Stock Exchange, above Total's initial C$1.30 a share offer but below its final C$1.75 bid.
http://www.reuters.com/article/marketsNews/idUSN1628556020090616
