• 17 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 19 hours Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 21 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 22 hours Schlumberger Warns Of Moderating Investment In North America
  • 23 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 24 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 1 day Mexico Says OPEC Has Not Approached It For Deal Extension
  • 1 day New Video Game Targets Oil Infrastructure
  • 1 day Shell Restarts Bonny Light Exports
  • 1 day Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 1 day Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

Russia Goes All In On Arctic Oil Development

Fighting sanctions and low oil…

Alt Text

Can Trump Drive A Wedge Between Saudi-Russian Alliance?

Trump’s Iran deal decertification threatens…

Alt Text

Who Are The Biggest Buyers Of U.S. Oil?

Exports of U.S. petroleum and…

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

Oil Sands Output Growth Second Only To Shale

Oil sands refinery

Canada’s Mordor, as environmentalists like to call the oil sands, is notorious for how “dirty” oil extraction is there. It’s also notorious for how expensive it is to extract. The dirt argument, which concerns the energy intensity of oil sands production compared to other oil extraction methods, has been partially refuted: some oil production in California is dirtier than oil sands. The price argument is also being refuted by the producers themselves: oil sands extraction is becoming cheaper, and it is rising.

Oil sands production has historically had some of the highest production prices in the industry due to the complexity of the process that turns bitumen into fluid crude oil. Like their peers in the shale patch, however, oil sands miners were motivated to increase their efficiency during the recent price crash. The results from this boost are now becoming evident.

Earlier this week, the Canadian Association of Petroleum Producers reported a forecast that the industry will reduce its spending for the third year in a row in 2017—to US$11.3 billion (C$15 billion). This is compared to US$25.6 billion (C$34 billion) spent in 2014.

One interpretation of this forecast is that international pries are still weak, and this fuels uncertainty about growth prospects. In other words, oil sand miners are being cautious.

Yet this is not the whole story, especially if we look at another recent release, this time from HIS Markit. According to the market researcher, oil sands output will grow by half a million barrels daily in the current financial year—despite lowered spending. This means that Canada’s oil sands will be the second-largest source of oil supply growth, after the U.S. shale patch. Related: How A $200,000 Well Could Drastically Change The Oil Industry

Production growth is not generally seen as a sign of weakness in an industry. It’s quite the opposite, in fact, so this output growth after the recent Big Oil exodus from the oil sands may look confusing. Yet Big Oil has its own agenda: focus on quicker-return, lower-cost projects anywhere in the world. Canadian oil sands miners, on the other hand, as Wood Mackenzie expert Michael Hebert noted in a recent analysis of the industry, are much more locally focused, reinvesting solidly in projects at home rather than seeking international expansion. In their case, production growth is the only way to go, pretty much like shale drillers.

To date, about 70 percent of all Canadian oil sands projects are the property of the four biggest local companies in this sector. That’s a major consolidation that will motivate more efforts going into further improving production efficiency, while at the same time, reducing the energy intensity of oil sands production. With the exit of Shell, Conoco, and Marathon, Canadian energy companies can now only rely on themselves to come up with better mining and processing technology to optimize their production, bringing down costs.

According to Wood Mac’s Hebert, project optimization along with boosting operating efficiencies will be the two drivers behind growth in the oil sands industry in the near term. According to IHS Markit’s Kevin Birn, growth in the industry will come from raising output from existing projects rather than launching new ones, and from improving their utilization rates.

In a sub-$50 price environment, this seems like the best course of action. Despite all the efficiency and utilization rate improvements already made, oil sands extraction remains a high-cost production method compared with conventional oil and shale.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Citizen Oil on June 18 2017 said:
    So , all this production increase and efficiency gains should translate into awesome profits and stock gains for all the producers even at $ 45 oil then ? Not. Something is amiss here . We are continuously told nothing but bearish news and yet these guys continue to get financing and support and do nothing but increase production in an environment that should be bankrupting them.
  • John Scior on June 18 2017 said:
    Just a thought experiment here. Suppose I buy cherries at the market and then suddenly for no apparent reason the price of cherries goes up. Way up. To the point that cherry pie makers are going out of business and the grocery stores ( as it turns out had colluded to raise prices ) are making money hand over fist. I then become determined to have cherries so I plant a tree and a few years later I pay someone to pick cherries so I can once again can enjoy a cherry pie. And as it turns out many of my neighbors have done the same. The monopoly has been broken and the grocers once again charge a reasonable price for cherries. Do my neighbors and I chop down our cherry trees ? No. Although the cost of these tar sands extraction is expensive, it provides an alternative source for oil. Even though the price you pay for the oil for this technique may exceed the price you can obtain, for said oil. The fact that you have a backup plan allows your refiners and gasoline stations the ability to purchase oil for refining and retail sale at a lower price and thus the sunk costs of the tar sands project and extraction are mitigated by the overall low price you obtain on the world market. Enjoy some cherry pie !
  • Peter B on June 19 2017 said:
    Canada's oil sands also benefits from all the technical talent that has fled Valenzuela to work in the oil sands thanks to the crazy government they have there.
  • George B on June 19 2017 said:
    The tar sands are a immense natural resource to Canada and their development is not only inevitable, it's an economic imperative. The Kinder Morgan pipeline to Vancouver will triple tar sands oil production to a competitive world scale energy supplier to China and India. Trudeau is just like other progressive politicians. Talks-up greenhouse gas emissions and global warming while pushing the Hell out of fossil fuels exports to make money to sustain the socialist state.

Leave a comment




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