Canadian oil giants join in US$15.5 billion deal
PORT SPAIN
Trinidad & Tobago Guardian
Petroleumworldtt.com
03 24 09
Petro-Canada, a major oil company with interests in T&T, is to be acquired by another Canadian company, Suncor Energy Inc, for US$15.5 billion, uniting two of Canada's biggest oil companies at a time when Canada's energy industry retrenches.
Petro-Canada has three offshore production sharing contracts (PSCs), in partnership with the State oil company, Petrotrin, and is also a partner in the North Coast Marine Area (NCMA) natural gas development offshore T&T which supplies gas to the Atlantic Liquefied Natural Gas (LNG) plant at Point Fortin. If the deal announced yesterday is approved, it would create the largest oil company in Canada and have a market capitalisation of about US$38 billion.
The companies said they could save US$244 million in operating costs and US$812 million in capital efficiencies each year. Both companies have put off projects to develop oil sands in Alberta because oil prices now are too low to make the projects viable. Alberta's once-booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans as the price of oil has plummeted from its record high last summer. Suncor reported a fourth quarter loss in January, the first in its history.
The blocks involved in the Petro-Canada and Petrotrin partnership, blocks 1a and 1b are located in the Gulf of Paria and Block 22 lies in deep water off the north coast of Tobago. The company reported “modest” gas discoveries in the Gulf of Paria which, it said, could result in a medium-sized development project when combined with existing reserves in its block. It has completed the Casra 1 well in Block 22, which it considered a “significant” gas discovery.
“We're in a period here where financial uncertainty is very high on a worldwide basis. We have big time volatility of commodity prices and there's no assurance of where we go from here,” said Rick George, president and chief executive officer of Suncor, who will continue in those roles in the new company.
“The super majors, particularly Exxon and Shell, can invest through the bottom part of the cycle and are improving their positions in Canada. We at Suncor have two options. We can pull back, which we obviously did on a capital basis, or we do something that would really strengthen our position and allow us to come out of this cycle stronger than ever.” Analysts say oil prices need to be between US$75 and US$100 per barrel to be make new oil sands projects economically viable. Crude prices were trading at more than US$53 yesterday, but have been much lower in recent months. “We're going to invest in the lowest risk, highest return capital projects,” George said.
“It's a made in Canada response to the challenges presented by global market uncertainty today,” said Ron Brenneman, president and chief executive officer of Petro-Canada. He will become executive vice chairman in the merged company. “This new entity will be the largest energy company in Canada and will take its place on the global stage as one of the largest independent energy companies in the world.” Industry officials estimate the oil sands in northern Alberta could yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves.
Story from Trinidad & Tobago Guardian
Trinidad & Tobago Guardian
March 23rd, 2009
Copyright© 2008
respective author or news agency. All rights
reserved.
We welcome the use of Petroleumworld™ stories
by anyone provided it mentions Petroleumworld.com
as the source. Other stories you have to get authorization
by its authors.
