TORONTO -- Suncor Energy, Canada's largest oil-sands producer, said it and partner Total won't proceed with a plan to build a multibillion-dollar facility designed to refine heavy bitumen into a light, low-sulfur synthetic crude.
Suncor has warned for months that it was reviewing the project amid a glut of low-sulfur crude in the US.
New drilling and extraction techniques -- in particular, in North Dakota -- have enabled producers to extract large volumes of light crude across the US. That is competing with the synthetic crude that Suncor and other Canadian producers have been processing and selling to US refineries.
Amid the US oil boom, Suncor executives said it may not make sense to spend money on a new upgrading facility, which was to be located in Alberta. Instead, Suncor said it could be more economical to simply send unprocessed heavy bitumen to refiners equipped to handle it.
"Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project," said Suncor CEO Steve Williams said Wednesday.
Earlier this year, Suncor said it would recognize a $1.5 billion charge tied to Voyageur, signaling widely that the project would likely die. On Wednesday, it said it would take an additional charge of $140 million for the first quarter.
Suncor also said it had agreed to acquire Total's interest in the Voyageur upgrader partnership, for $515 million. A spokeswoman for the Paris-based company declined to comment on the decision.
Dow Jones Newswires