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Report predicts $180B in oilsands spending
News Articles | Calgary Herald | January 07, 2011
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CALGARY – Investment in Alberta’s oilsands is set to reach a whopping $180 billion over the next decade, peaking at 20 per cent more than was spent during the height of the last boom, according to Peters & Co.
Strong and sustained oil prices in the $75 to $90 US per barrel range and increased interest from deep-pocketed foreign investors such as state-owned PetroChina and France’s Total are leading the charge in renewed interest in the resource, the Calgary-based investment house said.
“The increased level of transactions can be attributed to robust economics and the scarce availability of a large scale resource with low political risk,” said the report, released late Wednesday.
“Ultimately, the oilsands will continue to be attractive for entities wanting to amass large oil resource in an economically and politically safe environment, as Canada arguably has a strong combination of these attributes relative to other jurisdictions.”
Oilsands production has jumped to about 1.5 million barrels per day of bitumen and upgraded crude, from 1.2 million barrels in 2008, when a dramatic decline in oil prices put many projects on hold. Investment in the oilsands plunged almost 40 per cent during the 2008-09 freeze, but is slated to return with a vengeance.
Total capital spending in the oilsands industry will hit a high of $22 billion in 2014 as thermal, mining and upgrading projects break ground, Peters & Co. forecast.
Other analysts anticipate even larger investments, with BMO Capital Markets forecasting $20-billion worth of investment in the oilsands this year.
The financial house estimates investment in Alberta’s oilsands will peak at $29.9 billion by 2015.
“The peak keeps getting pushing out, but there could be a new peak, assuming we get the continued strength in oil prices,” analyst Mike Mazar said.
Oil prices gained 28 per cent during the last quarter of 2010, closing Thursday at $88.26 US per barrel.
Service and pipeline companies also have benefited from the rising activity levels in the oilsands, welcoming the influx of cash while at the same time anticipating increased competition for workers.
“If you get up into the $18-$20 billion spend rate that we saw in 2007-2008, it’ll get pretty tight again,” said Guy Cocquyt, with Flint Energy Services.
The oilsands services and maintenance heavyweight is gearing up for another big push in late 2011 and early 2012 after wrapping up several major projects with Shell Canada and Statoil Canada in July, Cocquyt said.
On the gathering side, Inter Pipeline Income Fund is looking to capitalize on its recent multibillion-dollar investments in oilsands infrastructure.
The company added approximately one million barrels per day capacity to its network of northern pipe, said spokesman Tony Mate.
“There’s a wave of capital that’s going to be required for all the projects to be developed, and that hinges on the price of oil,” Mate said. “It would put some cost pressure on if they all came to bear, but we are in good shape to handle what we think will come down the pike.”
Uncertainty over looming environmental legislation around greenhouse gas emissions, water usage and tailings remediation could inflate costs and cause regulatory delays, said Peters and Co.
“Environmental costs, particularly with respect to tailings from mining operations, are significant and will require spending,” the report said.
However, new federal Environment Minister Peter Kent quickly responded to industry concerns, saying Thursday that Ottawa would not compromise the nation’s economic recovery by hindering development of the multibillion-dollar resource.
Kent, who was given the environment portfolio on Tuesday, characterized Alberta’s oilsands as “ethical” and providing an economic boom for the country in a prior interview with the Herald.
Prime Minister Stephen Harper’s government set out a goal to cut national greenhouse gas emission levels 17 per cent below 2005 levels by 2010, a target too modest for environmentalists.
Tagged with: oil demand, investment, oil prices, oil industry
