• 5 minutes Malaysia's Petronas vs. Sarawak Court Case - Will It End Up In London Courts?
  • 9 minutes Sell out now or hold on?
  • 16 minutes Oil prices going down
  • 3 hours Oil prices going down
  • 5 hours Oil and Trade War
  • 18 hours Two Koreas Agree To March Together At Asian Games
  • 5 hours When will oil demand start declining due to EVs?
  • 7 hours Sell out now or hold on?
  • 9 hours Correlation Between Oil Sweet Spots and Real Estate Hot Spots
  • 7 hours Russia and Saudi Arabia to have a chat on oil during FIFA World Cup - report
  • 5 hours venezuala oil crisis
  • 4 hours Trump Hits China With Tariffs On $50 Billion Of Goods
  • 2 hours What If Canada Had Wind and Not Oilsands?
  • 3 hours After Three Decade Macedonia End Dispute With Greece, new name: the Republic of Northern Macedonia
  • 9 hours Malaysia's Petronas vs. Sarawak Court Case - Will It End Up In London Courts?
  • 5 hours Germany Orders Daimler to Recall 774,000 Diesel Cars in Europe
  • 1 hour The Wonderful U.S. Oil Trade Deficit with Canada
  • 18 hours Geopolitical and Political Risks make their strong comeback to global oil and gas markets
  • 15 hours Trump Renews Attack On OPEC Ahead Of Group's Production Meeting
Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

$40 Billion In Spending Planned For Canada’s Oil Sands

Oil Train

The oil sands of Alberta have attracted a lot of attention recently, not just because of the wildfires that took a lot of production offline in May, but also because of longer-term issues such as environmental protection and oil price trends. It seems, however, that they have a reasonably bright future ahead of them.

A GlobalData report has revealed that total capex investments in the oil sands stand at $82.8 billion, of which $40.6 billion worth of new and expanding projects are seen to come on stream over the next ten years. That’s pretty impressive against the backdrop of divestments and cost cuts that have plagued the local oil industry thanks to the oil price rout.

The oil sands are a major contributor to the Canadian GDP. Last month Statistics Canada reported that, because of the wildfires, GDP in May fell by 0.6 percent, which was the weakest monthly development since 2009. The fires in Ford McMurray caused a 2.8 percent contraction in the combined output of goods-producing sectors of the country’s economy, with the output of the mining and oil and gas industries together dropping as much as 6.4 percent. A recent survey from the central bank of Canada suggested the consequences from the oil price drop could be worse for the country than the 2008 financial crisis.

In light of this, the news about solid investments in new oil production from the sands is certainly welcome. What’s not so good perhaps, is that these investments don’t mean that the end of the belt-tightening has come.

On the contrary, as Rigzone quotes GlobalData analyst Adrian Lara, more cost-cutting is in order because the average breakeven point for oil sands operators is still relatively high: for projects that have not been allocated any funding yet, this point is between $40-60 a barrel, says Lara, but for already active projects that need expansion, breakeven falls to as little as $25 a barrel.

Over the recent earnings season, the top three players in the oil sands – Suncor, Cenovus, and MEG – all reported considerable improvement in cost-cutting efforts. What’s more, focus is shifting towards expansion of existing projects – in line with GlobalData’s findings – and away from new, large-scale undertakings. Related: Oil Soars 6 % As Andy Hall Warns Of A “Violent Reversal”

The value of projects expected to come online over the next decade may seem pretty substantial, but make no mistake, oil sands operators are being frugal. Since the start of the year, these companies have raised over C$15 billion in debt and equity, but they are in no rush to spend it on anything besides cheap assets. Suncor, for instance, has spent $6 billion over the last 12 months on expanding its oil sands footprint, taking advantage of cheap prices, prompted by equally cheap crude on international markets.

Companies active in the oil sands know that challenges remain and are proceeding cautiously. The international market for crude is still unbalanced, and it remains uncertain when balance will be regained. There is healthy demand for Canada’s heavy crude from U.S. refineries, but the full effects of environmental legislation on the industry have yet to be seen. There are also problems related to access to water – an essential element of oil sands crude extraction – and the expansion of the pipeline network.

In short, oil sands operators are spending, which is good, and they are spending frugally, which, from their perspective, is even better, raising their chances of turning in solid profits when the price recovery finally happens.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News