December 8, 2011 / 5:54 PM / 6 years ago

Total's Alberta oil sands project gets approved

CALGARY, Alberta (Reuters) - The Canadian government gave Total SA approval on Thursday to start construction on its C$9 billion ($8.9 billion) Joslyn North oil sands project in Alberta, marking the fifth mining development in the vast crude deposit.

Total, the French oil major, and its Canadian, U.S. and Japanese partners aim to start production in 2018, hitting a peak of 100,000 barrels a day.

While the company welcomed Ottawa's go-ahead, following a six-year regulatory review, it has yet to make its final decision on whether to proceed with the massive project.

The decision will be made "in the near future," Jean-Michel Gires, the head of Total's Canadian unit, told reporters. "In the meantime we are going push early works at the field level and finish engineering studies."

Natural Resources Minister Joe Oliver announced the decision as controversy spreads at home and abroad over the environmental impact of developing and transporting oil sands crude. Ottawa has made boosting and diversifying exports of the unconventional oil - possibly to Asia - a top priority.

The tar sands of northern Alberta are the world's third-largest oil reserves, behind Saudi Arabia and Venezuela, but the largest open to private investment. While the region is the biggest source of U.S. oil imports, separating the tarry bitumen from the sands and refining it into gasoline and other products produces more carbon dioxide than conventional oil production.

Environmental groups at the United Nations climate summit in Durban, South Africa, have been sharply critical of Ottawa's aim to foster more development of the resource, which accounts for rising emissions of greenhouse gases.

"Approving Total's Joslyn tar sands mine during the UN climate summit in Durban is like poking the international process in the eye," Gillian McEachern, Environmental Defense's deputy campaign director, said in a statement. "...Canada's reputation has already been battered on the world stage because we're siding with big polluters instead of taking action on global warming, and this new tar sands mine will reinforce that."

STREAMLINING REGULATIONS

Still, Oliver told reporters in Ottawa that a six-year approval process for the Joslyn North project showed the need to streamline regulations for investors in the oil sands, which is part of the federal government's push. Oliver said he favors a two-year review process.

"The oil sands are generating jobs in just about every sector of our economy, from welders to office workers to engineers. But we cannot take these jobs for granted. Oil sands development does not just happen. Investors have other opportunities," he said.

The approval comes two days after regulators said they extended the hearing process for Enbridge Inc's Northern Gateway oil sands pipeline to the Pacific Coast by about a year to the end of 2013, possibly pushing back the start-up date should the controversial project be approved.

The Gateway line would carry 525,000 barrels of crude a day to the port of Kitimat, British Columbia, where it would be loaded onto supertankers and shipped to Pacific Rim markets.

The Joslyn North project is located 65 km (40 miles)northwest of the oil sands hub of Fort McMurray, Alberta. Total said its construction workforce will peak at 4,100 people.

The company said it expects to eventually process the crude at the Voyageur upgrader it plans with partner Suncor Energy Inc. Gires said a final investment decision on Joslyn North will be co-ordinated with a decision on the upgrader, which converts the bitumen into refinery-ready synthetic crude.

If built, Joslyn North would be the oil sands' fifth mining project, joining operations run by Syncrude Canada Ltd, Suncor, Royal Dutch Shell Plc and Canadian Natural Resources Ltd. Mining is the most cost-effective way to exploit near-surface deposits while deeper reserves are tapped by pumping steam into wells to liquefy the heavy bitumen.

Total has a 38.25 percent stake in Joslyn North and is the operator. Suncor holds 36.7 percent and Occidental Petroleum and Japan's Inpex hold the rest.

($1=$1.02 Canadian)

Reporting by Jeffrey Jones, Scott Haggett in Calgary and David Ljunggren in Ottawa; editing by Rob Wilson

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