ConocoPhillips Acquires Rest of Surmont Oil Sands Stake from TotalEnergies

ConocoPhillips has completed the purchase of the remaining 50 percent interest in the Surmont oil sands project from TotalEnergies EP Canada Ltd. for approximately $2.7 billion cash (CAD 3.7 billion) after closing adjustments, as well as future contingent payments of up to approximately $0.3 billion (CAD 0.4 billion).

ConocoPhillips now owns 100 percent of Surmont and will continue as operator, the company said in a news release Wednesday. The transaction is subject to contingent payments for a five-year term of up to approximately $0.3 billion (CAD$0.4 billion) representing $2 million (CAD$2.7 million) for every dollar that Western Canadian Select (WCS) pricing exceeds $52 per barrel during the month, subject to certain production targets being achieved, according to the release.

Surmont is located in the Athabasca region of northeastern Alberta, approximately 35 miles south of Fort McMurray. According to the company website, Surmont’s net production reached 69 million barrels of oil equivalent in 2011. ConocoPhillips in the same year signed a long-term commercial contract to process Surmont’s blended bitumen at a diluent recovery unit in Alberta, unlocking additional value for the asset. The company’s bitumen resources in Canada are produced using steam-assisted gravity drainage (SAGD) technology, which involves the injection of steam into the reservoir, effectively liquefying the heavy bitumen, which then is recovered and pumped to the surface for further processing.

“Long-life, low sustaining capital assets like Surmont play an important role in our deep, durable and diverse low cost of supply portfolio", ConocoPhillips Chairman and CEO Ryan Lance said. “This transaction enhances our returns-focused value proposition, improves our return on capital employed, lowers our free cash flow breakeven, and is expected to deliver significant free cash flow for decades to come. We know this asset very well and plan to further optimize it while remaining on track to achieve our GHG emission intensity reduction goals”.

ConocoPhillips said it remains on track to achieve its previously announced accelerated greenhouse gas intensity reduction target of 50 to 60 percent by 2030, using a 2016 baseline. Since 2016, Surmont's greenhouse gas emissions intensity has declined by about 20 percent, and the company said it “has plans for future operational emissions reduction by applying both current and new technology”. ConocoPhillips is a member of the Pathways Alliance, working on a goal of net-zero emissions from oilsands operations.

In September, ConocoPhillips signed a commercial agreement to secure additional regasification capacity in Europe at the Gate LNG terminal in the Netherlands. The 15-year throughput agreement for approximately 1.5 million tons per annum (mtpa), or 70.63 billion cubic feet (two billion cubic meters) equivalent, begins in September 2031 and “secures access to this important market for the company’s growing global LNG [liquefied natural gas] portfolio”, ConocoPhillips said in an earlier news release.

ConocoPhillips said the agreement further complements its LNG resource positions in Qatar and Australia, offtake and equity in Sempra’s recently sanctioned Port Arthur LNG Phase 1 project on the USA Gulf Coast, regasification agreement at the German LNG Terminal announced in 2022, and the offtake agreements at Mexico Pacific’s Saguaro LNG export facility on the west coast of Mexico announced in August.

Gate Terminal BV, a joint venture of Vopak and Gasunie, is an LNG hub at the Port of Rotterdam that contributes to the natural gas supply in the Netherlands and northwest Europe. According to the company website, Gate Terminal is the first Dutch LNG import terminal and has been operational since 2011. The terminal has an annual throughput capacity of 423.8 billion cubic feet (Bcf), or 12 billion cubic meters, of gas per year, covering approximately a third of the national gas consumption. The terminal has three storage tanks, three jetties, three loading sites for lorries, and an area in which LNG is converted into gas.

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