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$15 Billion Oil Sands Project Might Not Go Ahead Even If Trudeau Approves It

Oil sands

Teck Resources is uncertain it will go ahead with a planned oil sands project that is awaiting the approval of the federal Canadian government, the Canadian Press reports, citing Teck’s chief executive.

The Frontier project, estimated to be worth $15.6 billion (C$20.6 billion), is an open oil sands mine that would yield 260,000 bpd at peak production, with its life estimated at 40 years. Yet it must first be approved by the Liberal government that has strict climate change fighting goals.

According to Teck Resources’ CEO Don Lindsay, however, the project may not go through even if the government grants it approval. The problem, he said during an investor conference in Alberta, was oil prices, among other things. Frontier’s profitability was based on higher oil prices, much higher than they are now. When it was first floated, the plan saw profitability at a West Texas Intermediate price of $75 per barrel. WTI is currently trading at a little over $50 a barrel and hasn’t touched $70 for years.

At the moment, the federal government’s decision on the Frontier project is closely watched by all stakeholders. According to some, this decision could seal the fate of the Canadian oil sands industry, which is why it is very likely that the government will delay it as it seeks to find a way to please two opposing camps that have no meeting point. The pro-oil camp wants the industry to grow. The pro-climate camp is fixated on emission reduction.

Whatever Prime Minister Trudeau decides, one of these groups will be unhappy.

Yet if the government does approve the project and Teck Resources decides not to go ahead with it, this could be an even harder blow to the industry, a sign that the investment climate and the oil price environment has worsened so much that it is making projects that were deemed profitable just three years ago, unprofitable.

By Irina Slav for Oilprice.com

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