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Suncor Energy Inc. has taken a writedown of nearly $1.5-billion on its Voyageur project, a massive oil sands plant that is now at serious risk of cancellation. And in an additional potential blow, Suncor faces a $1.2-billion tax bill, which it is disputing.
The $11.6-billion Voyageur upgrader is designed to process 200,000 barrels per day of heavy oil sands bitumen into a lighter oil. The project was 15 per cent built, and Suncor had already spent $3.5-billion, when Suncor halted work in 2009.
Though Voyageur has not yet been abandoned, the writedown was accompanied by pessimistic commentary in Suncor’s fourth-quarter results, which were released Tuesday evening.
“Suncor’s view is that the economic outlook for the Voyageur upgrader project is challenged,” the company said. It added: “The partners have been considering options for the project, including the implications of cancellation or indefinite deferral.”
A decision is expected by the end of March, Suncor said. The company will also, with its partner Total, make a decision on whether to build its Fort Hills oil sands mine in the second half of this year. Joslyn, the third project that forms the partnership with Total, appears to be less certain, with Suncor giving no timeline for a decision.
“Suncor plans to provide an update on the targeted timing for a sanction decision on the Joslyn project when available,” the company said.
Suncor may also face a $1.2-billion tax bill. It said in a statement that it has “received a proposal letter from the Canada Revenue Agency (CRA) relating to the income tax treatment of the realized losses in 2007 on the settlement of the Buzzard derivative contracts.” Though Suncor “strongly disagrees with the CRA’s position” and “firmly believes it will be able to successfully defend its original filing position,” the company warned that it may be forced to pay half the amount – $600-million – “until the dispute is resolved.”
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