Limited pipeline space and the growth of tight oil make Canadian heavy crude less attractive. Now Total (NYSE:TOT), Suncor (NYSE:SU), and Occidental Petroleum (NYSE:OXY) have put the $11 billion Joslyn North oil sands mine on hold indefinitely thanks to continued price inflation. The Canadian oil sands' place in the global energy market is being redefined, and only higher-quality mines will remain. 

Not all oil sands developments are the same
Suncor cancelled Joslyn North just months after approving Fort Hills with Total and Teck. While Joslyn North's cost structure was too unattractive, Suncor estimates that it can make a 13% internal rate of return with Fort Hills as long as bitumen prices are at $60.50 per barrel. The challenge is that after accounting for bitumen's discount, Total estimates that it needs Brent to remain around $100 per barrel for the project to be economic.

Another big difference between the two projects is that Fort Hills is expected to produce oil for about 50 years at 180 thousand barrels per day (mbpd) one year after start-up. Joslyn North, on the other hand, was slated to produce 100 mbpd for 20 years.

Oil sands developments produce stable cash flows and are well suited to replace aging fields, but transportation issues leave a limited number of developments that are worth bringing to market. 

The growth opportunities
Even the oil sands focused firm Suncor is trying to diversify itself into offshore developments. Its Hibernia project, operated by ExxonMobil, is expected to see its southern unit ramp up in 2015. The Hebron and Golden Eagle projects are expected to see first oil in 2017 and late 2014 respectively.

Total watches its reserves carefully, and in 2013 it posted a very strong reserve replacement rate of 119%. Its support of Fort Hills shows that Total still considers the Canadian oil sands a viable tool to replace falling production. Like Suncor, Total is using offshore developments to create a diversified production base. Its Eigna and Moho Nord projects off the coast of Western Africa are expected to come online by 2017 and 2016. In Brazil it continues to work on the Libra field. 

Teck is the exception. It is a mining firm trying to find solace from the challenging coal market. The $12.9 billion Fort Hills oil sands project makes sense for a big diversified energy firm like Total, but it will be an expensive project for a smaller miner like Teck. From the first quarter of 2013 to the first quarter of 2014, Teck's operating income fell from $155 million to just $70 million.

Even after boosting copper, coal, and zinc concentrate production, falling realized prices and rising costs cut into Teck's income. With 2013 revenue of $8.8 billion, Teck is also significantly smaller than Suncor or Total. Regardless, Teck has little choice but to put more money into Fort Hills to try to diversify into different markets. 

The tight oil option
Abandoning expensive oil sands projects in favor of other organic projects is a great option for Occidental Petroleum. Occidental has attractive acreage in the Permian Basin, where it operates legacy enhanced recovery operations (EOR) and growth-oriented tight oil operations. By postponing oil sands developments, it is able to put more capital into the Permian basin. In 2014, its Permian EOR spending will just be $660 million while $1.5 billion will go into Permian growth oriented developments.

In addition to profitable U.S. onshore developments, Occidental is also a big backer of the Al Hosen gas project in the Middle East. It is expected to reach first production in the fourth quarter of 2014, eventually bringing in $600 million per year in free cash flow at current liquids prices.

The Foolish bottom line
Higher-quality oil sands developments still have their place for companies with big balance sheets. For this reason, Fort Hills is a good fit for Total and Suncor. Occidental Petroleum, on the other hand, has a significant amount of tight oil acreage to be developed, and Joslyn North's rising costs and 20-year production profile make it a poor use of capital.