Statoil is a portrait of despair. They bet on Venezuela, and lost. They could have gotten into Alberta oilsands long ago, and declined. Now all that is "mineable" has been sold. So they try to get into 'Phase II', the stuff too deep to be mined, that won't be available for years, and requires much more up-front investment. Someone else lost $6 billion in Alberta too the other day...

Let's call it:

While waiting for the Arctic to melt

Statoil hunts for $10 billion, 2nd generation, oil sands deal

Norway's Statoil ASA is on the hunt for an oil sands project, saying it is aiming to strike a deal worth more than a billion dollars to claim a stake in Alberta's bitumen deposits.

The state-owned company -- shrugging off concerns about inflationary pressures in the sector -- said its strategy centres on building an integrated project, complete with an upgrader. Executing that strategy would eventually cost upward of $10-billion, but Statoil is looking to acquire both a project and at least one partner.

Statoil, which is among the top 10 publicly traded oil producers in the world, quietly opened an office in Calgary this spring.

There have been a flurry of oil sands deals in the past 18 months, largely involving large-scale mining efforts, and analysts have suggested the window has closed for deals to acquire that sort of project. That notion does not perturb Statoil, Mr. Sortland said.

He characterizes mining projects as the "first generation" of the oil sands; he is focusing his efforts on in situ projects -- the second generation, in his view -- that melt bitumen and pump it to the surface rather than excavating millions of tonnes of earth.

Statoil has extensive experience with Venezuela's heavy oil deposits, which pose many of the same production challenges as Alberta's oil sands -- particularly in situ projects. At the turn of the decade, Venezuela's Orinoco belt was seen as Alberta's rival for investment capital in non-conventional projects.

But the election of Hugo Chavez in that country, and a subsequent strike and abortive coup, have resulted in increasing pressure against Western oil companies operating in the region, including Statoil.

The Venezuela government is reopening operating agreements to give its state-owned firm, Petroleos de Venezuela SA, a majority stake in upstream operations. The Chavez government has also raised royalty rates, and mused about bringing criminal charges against former officials who crafted the 1990s-era policies that fostered private sector investment.

Last week, Statoil and other Western firms were shut out of the latest preliminary contract round for the Orinoco area.