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Total chief bullish on oil-sands future

Christophe de Margerie claims the resource is a factor in world prices

THREE years after predicting the Canadian oil sands would help shape the global oil market, Total chief executive Christophe de Margerie now claims the resource is a factor in setting world prices.

Because the capital and operating costs of developing the resource are so high, the oil sands are “helping the price at least stay high … but if you don’t produce it, it’s even worse”, he told a business audience in Calgary.

The cost of crude “depends on the marginal cost of reinvestment”, de Margerie said, adding “that’s why there is a strong link with Canada and Alberta, because today the more expensive source of oil is Canada.”

Part of the business plan

For Total, unconventional resources are “part of our business plan”, he said. “We want this oil and we will take responsibility for it. Elsewhere in the world, output from oilfields is declining, but in Alberta that is not the case. If we cannot develop heavy-oil resources [in Alberta] we cannot do it anywhere,” de Margerie said.

Total aims to double its oil-sands output of 55,000 barrels a day (b/d) from the Surmont thermal recovery project, a 50:50 joint venture with ConocoPhillips, by 2015.

Its new strategic partnership with Suncor Energy involves the 160,000 b/d Fort Hills and 110,000 b/d Joslyn bitumen-mining projects, along with the 200,000 b/d Voyageur upgrader – all now in various stages of development.

Total plans to invest C$20 billion ($20.4 billion) into its oil-sands portfolio by 2020, raising its unconventional-oil output to 200,000 b/d.

De Margerie conceded that Total’s presence in Alberta's controversial oil-sands play may have harmed its reputation among some shareholders and European environmental groups. But he insisted development of the bitumen deposit is too important to global energy supplies to be curbed. “The oil is needed,” he said. “I don’t consider it ugly. I consider it needed.”

Clean and smart

He said those who argue that unconventional development is not good for the planet cannot be told to “go to hell … rather, we want to prove we can do it in a clean and smart way using technology to create more energy for the world.”

“This oil is needed and my dream will be to say one day that heavy oil is a conventional resource,” de Margerie said. “Alberta is playing a leading role globally in proving that unconventional oil can be produced in a cleaner way.”

De Margerie also endorsed Enbridge’s planned 525,000 b/d Northern Gateway project to deliver oil-sands crude to Asia and the US west coast.

He said Total, based on its belief that Canada needs to expand beyond its US export market, is “looking at” the project. “If, because of our relationships with our Chinese partners, it makes sense, we might do something with [Enbridge],” he added.

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