Suncor deal to buy Petro-Canada may trigger wave of consolidation

Calgary, Alberta: Suncor Energy's deal to buy rival Petro-Canada for shares worth C$18.4 billion (Dh54.68 billion) will create a dominant player in the Canadian oil sands and may spur a consolidation wave as rivals try to match the cost savings Suncor hopes for.

In the largest Canadian energy takeover deal, Suncor will become the No 1 oil company in Canada if shareholders and regulators approve the transaction, announced on Monday.

The expanded Suncor expects to save C$1.3 billion a year by reducing cost overlaps and by winnowing down the two companies' lists of capital projects.

It's a crucial factor given that both Suncor and Petro-Canada have had to mothball projects in the hard-to-develop oil sands of northern Alberta due to plunging oil prices and rising costs.

Petro-Canada expects the deal will shave costs at its planned Fort Hills oil sands mine - one of the C$90 billion in oil sands projects that have been deferred, delayed or cancelled outright due to the fall in oil prices.

The new company may also downscale plans for a C$2 billion pipeline to serve Fort Hills and delay building an upgrader to convert mined bitumen from the oil sands into refinery-ready synthetic crude.

Such cost savings and the sheer bulk of the merged company may force rivals to consider deals of their own.