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Posted on 11/04/2009 4:57:08 AM PST by thackney
Steadily rising oil prices will combine with lower costs to put some of the more than $100 billion in cancelled oilsands projects back on the front burner, according to a new study.
“I think we’re going to see over the next six to eight months more projects coming on,” said research director David McColl of the Canadian Energy Research Institute.
CERI’s oilsands supply cost and development projects update report released Tuesday estimates under its “realistic” scenario that $309 billion will be spent over the next 35 years to increase output from 1.4 million barrels of synthetic crude and bitumen per day this year to 1.7 mmbpd in 2015, 4.5 mmbpd in 2030 and 5.3 mmbpd in 2041.
That’s a slower pace than CERI studies issued before last year’s credit crunch, which had envisioned 5 mmbpd by 2015 if all announced projects had proceeded.
Last week, the Canadian Association of Petroleum Producers said it expects oilsands spending, which fell about $8 billion this year from last year, will post a $2 billion increase in 2010.
CERI forecasts oilsands spending will jump from $3.9 billion this year — a decade low — to about $8 billion next year, largely due to spending on the planning and construction of Imperial Oil’s $8-billion Kearl oilsands mine, the first major deferred project to be restarted.
A 15 per cent slide in capital costs over the past year, coupled with a 13 per cent decline in operating costs, will encourage others to join in a new rush of oilsands investment, said McColl.
“This goes back to people asking the question: ‘Why did Imperial Oil move on Kearl? Why did Suncor purchase Petro-Canada and perhaps they’ll move on the UTS mine soon?” he said.
“What we find is that if you’re a mining project and you decide to go on stream now, over the next 35 years, instead of a 10 per cent return, you could be seeing returns around 18 per cent.”
CERI projects light oil prices will jump to more than $100 Cdn per barrel by 2013 and will steadily grow to average nearly $200 by 2043 due mainly to steady growth in demand from Brazil, Russia, India and China.
“You want to start today so that the first barrel you sell, you’re selling at that $100 trigger,” said McColl.
On Tuesday, Genuity Capital Markets analyst Phil Skolnick was the latest of several observers to suggest in a note to investors that Suncor Energy Inc. will sanction its Firebag 3 in situ oilsands project when it announce its capital strategy in two weeks.
He also said asset sales will be announced to help pay for further investments in the oilsands and raised his Suncor rating to “buy” from hold and hiked his 12-month target price to $44 from $41.50.
Bob Dunbar, president of oilsands consulting firm Strategy West Inc., said stronger oil prices bode well for development but the industry is still worried about the unknown costs of greenhouse gas emission regulations.
“I would see some additional activity getting underway,” he said. “But I think a lot of people in the industry are still being cautious because there’s uncertainty about the economic situation and also uncertainty about environmental regulations and potential costs for greenhouse gas emissions.”
He agreed Suncor’s Firebag is a good bet to proceed if oil prices stay strong and added that EnCana Corp.’s Christina Lake and Foster Creek in situ projects look promising because they can be expanded at a bargain price of about $20,000 per flowing barrel.
The CERI study estimates greenhouse gas emissions from the oilsands will nearly quadruple to 137 million tonnes per year by 2043. McColl said CERI increased its allowance for regulatory compliance costs to $137 billion over the period and it still doesn’t affect the economic viability of the oilsands.
The CERI study shows little economic support for upgrading in Alberta. It assumes the average cost of an in situ project will be $27,000 per barrel of daily production, mining will cost $82,000 and a mine and upgrader combination will cost $101,000.
Dunbar agreed, noting that the favourable price for heavy oil versus light oil makes it economically unattractive for anyone to build an upgrader in the near term.
What ever became of the oil field discovery in North Dakota?
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We’re still there, drilling away, the rig count is beginning to increase again.
The Three Forks is also producing huge amounts.
Canada will sign up in Copenhagen for UN control and have to give their oil drilling to China.
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