While Canada took one on the chin at the climate change conference in Copenhagen late last year, there was no sign of a pause in the focus of the criticism: northern Alberta’s oilsands. Far more significant to that industry’s health has been the influence of the financial markets and oil prices.
Just over a year ago, with markets in free fall, virtually every proposed oilsands project was shelved or cancelled. Indeed, major players such as Suncor Energy Inc. and Canadian Natural Resources Ltd. halted projects already under construction. But expansion of the oilsands is back on.
The turning point came last May, when Imperial Oil Ltd. greenlighted the $8-billion Kearl oilsands mine. Estimates suggest the company has saved 40% of what startup costs would have been a year earlier by going ahead while its rivals lay idle. Imperial had the wherewithal to start at a time of its choosing, without having to raise money in the capital markets, and knew all too well that oil prices would be very different by the project’s operational start date in 2012.
In July, Suncor completed its merger with Petro-Canada, giving the former cash flow and foreign assets with which to bankroll a restart of its Voyageur upgrader expansion and Firebag in situ (underground) projects. In November, Suncor announced it would spend $900 million in 2010 to restart Firebag.
In the autumn, Cenovus Energy, newly spun out of EnCana Corp., said it would spend $2.3 billion on its Foster Creek and Christina Lake properties this year. Fresh off a successful Whitesands pilot, Petrobank Energy & Resources plans to start up its larger May River project. Among the few to keep working through the market crash, Devon Canada is proceeding with Jackfish II and Statoil ASA, with Kai Kos Dehseh.
Foreign interests have continued to buy in, too. In August, a subsidiary of PetroChina Co. acquired two large properties operated by privately held Athabasca Oil Sands Corp. for slightly less than $2 billion.
Far from being a ghost town, Fort McMurray, Alta., is humming with business. A June survey by the Oil Sands Developers Group turned up 22,728 workers scattered around the backwoods work camps and motels. Engineering, construction and fabrication firms in Edmonton and Calgary are rehiring.
At Hardisty, in east-central Alberta — the hub for Canadian oil exports to the U.S. — Enbridge Inc. completed a tank farm that holds 7.5 million barrels of oil, or almost five days of oilsands production, in October. Rival pipeline company TransCanada Corp. needed 9.5 million barrels to fill its newly opened Keystone pipeline from Hardisty to refining regions in the U.S. Midwest (and on to the Gulf of Mexico). Together, the two facilities gulped up close to what the U.S. consumes in a day.
Even “Upgrader Alley” around Fort Saskatchewan, just northeast of Edmonton, is showing signs of life. It was here that up to nine facilities were planned to upgrade the semi-solid raw material known as bitumen into synthetic crude oil. Many were cancelled. But Shell Canada continued work on its Scotford Upgrader throughout the past year, Total E&P Canada restarted its upgrader project and a government bitumen royalty-in-kind agreement may give life to North West Upgrading’s merchant upgrader.
While activists from several countries denounce Canada’s oilsands, companies and investors from many of those same countries are helping production to grow, likely to more than 1.5 million barrels a day in 2010. Companies will continue to list emissions controls as a risk factor in their annual reports and prospectuses and, in many cases, to invest in more environmentally benign technology. But the expansion goes on. IE
The oilsands gear back up
- By: Michael McCullough
- January 26, 2010 October 29, 2019
- 14:23
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