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Chris Lee
Deloitte
While Canada’s oil sands industry continues to be the target of mounting domestic and international scrutiny regarding its environmental impact, opportunities for sustainable growth, improved operations and continued strides in green technology innovation have never been stronger. The fact is that negative perception of the oil sands has the potential to limit the sector’s foreign investment opportunities and interfere with its future development prospects.
But there’s good news, in that we are seeing more and more examples of companies who have traditionally been competitors joining forces to advance both the industry’s image and long-term business viability bycollaboratingto improve infrastructure, green technology and public education about environmental improvements.
Indeed, as demand for unconventional oil production heats up, oil sands players have begun re-positioning for another period of growth. Between the fact that roughly 75% of the world’s petroleum is locked up by national governments and the anticipated slowdown in deep water exploration that may reduce international supply, an explosion of new development and tremendous business opportunity in the oil sands could be imminent—if a corresponding escalation of costs can be avoided.
To make the most of the circumstances, all stakeholders would do well to keep the following ten trends in mind as they continue to develop and execute on their strategies:
1. Finding economic viability
Oil sands production is expensive. Before the 2008 economic downturn, when 46 projects were in production or proposed, the Canadian Association of Petroleum Producers (CAPP) forecasted five-year capital expenditures of more than $75 billion. For projects to remain viable and continue, recent research showed that most new bitumen-producing projects can show profit at prices around $50 to $70 per barrel. We expect exports of bitumen, diluted with synthetic crude, to increase significantly as US refiners bid for increasing supplies of heavy crudes to fill their existing upgrading equipment. At the same time, many industry watchers believe prices will continue to climb as demand for oil increases across the industrializing nations and as the output of international oil fields in Mexico, the Middle East and China decline.
