Suncor Energy Ltd. continued to consolidate its interest in Syncrude Canada’s oilsands mining operations on Thursday, announcing it would buy the five per cent stake owned since 1991 by Mocal Energy Ltd., a subsidiary of Japan-based conglomerate Mitsubishi Corp.
The purchase price of $920 million is slightly less than the $937 million Calgary-based Suncor paid for American Murphy Oil’s five per cent Syncrude stake in April 2016. It bought Canadian Oil Sands Ltd. and its 37 per cent stake in Syncrude for $6.6 billion in February 2016.
The Mocal agreement leaves the Syncrude consortium with just four partners. Canadians Suncor and Imperial Oil Ltd. hold 58.74 per cent and 25 per cent, respectively, while Chinese-owned Sinopec Oil Sands Partnership and Nexen Oil Sands Partnership have 9.03 per cent and 7.23 per cent.
Syncrude, which converts heavy sticky bitumen from open pit mines into a synthetic crude which fetches prices similar to U.S. benchmark West Texas Intermediate, has long been dogged with reliability issues.
“This transaction reflects our confidence in the long-term future of the oilsands and the high quality and value of the Syncrude asset, adding 17,500 barrels per day of high quality light sweet synthetic crude capacity to our portfolio,” said Suncor CEO Steve Williams in a statement.
Analysts say they expect Suncor to use its greater ownership to continue to push through integration and synergies with neighbouring Suncor oilsands operations near Fort McMurray in northern Alberta.
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“In our view, this is a no brainer,” said Barclays analyst Paul Cheng in a report.
“Suncor already owns 54 per cent of Syncrude and has also been increasingly deploying their own personnel in the joint venture. This acquisition will not increase Suncor’s cost base but will allow the company to further leverage the benefit of any future improvements at Syncrude.”
Suncor also announced it had acquired a 17.5 per cent interest in the Fenja Development in the Norwegian Sea, about 30 kilometres southwest of the Statoil-operated Njord field, from Faroe Petroleum for about $68 million.
The Fenja field was discovered in 2014 and is expected to be developed via a subsea tie-back to the Statoil-operated Njord platform.
Production is planned to start in 2021 and Suncor’s share of go-forward capital is estimated to be $280 million. Partners in the development are the operator VNG Norge, Point Resources, Suncor and Faroe Petroleum.