The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
CALGARY – The spending spree in Canada’s fast-growing oil sands is slowing as some of the country’s largest energy companies trim capital budgets and question the fate of some of their most important projects. Money continues to pour into the oil sands, where $1-billion is spent every two and a half weeks in the rush to add millions of barrels of capacity. But that spending has been under increased scrutiny.
The latest blow comes from Canadian Natural Resources Ltd., which said Thursday it has cut capital spending this year by $680-million or 10 per cent – much of that from its Horizon oil sands project. The company is attempting to hold the line on spending, while acknowledging that new projects will need oil prices of nearly $80 (U.S.) a barrel – not far from current levels – to turn a minimum acceptable profit.
The move comes amid what’s being called a “big rethink” of the oil sands, where costs have risen so high that new projects are increasingly vulnerable to crude prices at the same time as environmental pressures place question marks over the pipelines intended to take new barrels to market.
The CNRL spending pare-back comes a little more than two weeks after Suncor Energy Inc. abandoned a plan to reach production of a million barrels a day by 2020.
Suncor said it would instead apply “rigorous scrutiny” to three of its most important new oil sands projects, worth more than $20-billion (Canadian).
The new uncertainty casts a shadow over a rosy new industry forecast, released in June by the Canadian Association of Petroleum Producers, that projected oil sands output to more than double by 2021, adding just over two million barrels a day in a decade.
At the same time, it points to the upheaval facing an industry that has seen many of its fundamental assumptions shaken in recent years. Not only have new pipeline plans been the subject of massive public scrutiny, but a sudden rise in production of light oil spurred by technology have made clear that the oil sands are no longer the only – or best – bet for companies seeking to pump new barrels.
In Alberta alone, new fracking techniques have in the past two years brought 175,000 barrels a day of unexpected light oil production – the equivalent of two large oil sands facilities, notes Peter Tertzakian, chief energy economist with ARC Financial Corp.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/globe-investor/wary-oil-patch-gears-down/article4470876/