French oil major Total SA (TOT) Friday said its Canadian subsidiary Total E&P Canada Ltd. signed several agreements to form a strategic alliance in Canada's oil sands with Canadian group Suncor Energy Inc. (SU.T), pooling their combined interests in several projects in Alberta, Western Canada, and with Total paying C$1.75 billion to Suncor and dropping the construction of an upgrader in Edmonton.

Total's announcement came as Suncor announced separately it plans to more than double its oil sands output over the next decade, to more than 1 million barrels a day of oil equivalent, with an important part of its growth plan met thanks to the strategic alliance with the French oil giant.

Total will acquire 19.2% of Suncor's interest in the Fort Hills project, bringing its overall interest to 39.2% while Suncor, as an operator, will hold a 40.8% interest, and Teck Resources Ltd. will retain its 20% interest.

Total is also acquiring a 49% stake in Suncor-operated Voyageur upgrader project, near Fort McMurray. The construction of the facility was suspended in 2008 and is expected to have a 200,000 barrels per day capacity, processing Total's Fort Hills and Joslyn bitumen production. "Work will resume once the front-end engineering design is updated, in 2011," Total said in a statement.

Suncor will acquire 36.75% of Total's interest in the Joslyn project, and Total will retain a 38.25% interest, while Occidental Petroleum will hold 15% and Inpex 10%.

"As a result of the terms of these transactions and the related net balancing of the portfolio, in particular to contribute to the past costs of the Voyageur project," Total said it will pay Suncor C$1.75 billion, with a value date of Jan.1, 2011.

The two groups have also agreed to develop Fort Hills and Voyageur, so that both come on stream early 2016 and the main engineering and procurement contracts for the two projects will be awarded in 2011.

"With Total, we not only have a partner with capability and resources that complement our own, but one that shares our vision of responsible energy development through a commitment to a triple bottom line of economic, social and environmental performance," said Rick George, president and chief executive of Suncor.

Suncor's directors had approved a C$6.7 billion capital spending plan for 2011, with approximately C$2.8 billion to be directed toward growth project funding, primarily at the company's oil sands operations, it said.

Suncor, which is focused on developing Alberta's oil sands, also said it aims to increase oil sands output by 10% annually over the next decade.

Suncor has been selling non-core assets to focus on oil sands development in western Canada. To date, it has sold, or has agreements to sell, about C$3.5 billion of assets.

Copyright (c) 2010 Dow Jones & Company, Inc.