The oil sands retain their luster despite the obstacles
The sector will experience up and downs, but the resource is too large to be ignored
When oil prices hit one of those down cycles – as they have in North America in recent months – companies tend to rein in spending, looking to save cash until times get a little better.
The oil sands sector is not immune to this, of course, but the size of the resource is so tantalizing that most industry observers think it’s a matter of when, not if, the bulk of it is developed and investment pours into Alberta.
“You will see ups and downs because of the break-even price needed to make projects successful. Prices dip and people get nervous,” says Scott Sharabura, a Calgary-based principal with management consulting firm Booz & Co. “But this is where the resource is. Companies around the world are making large, long-term bets on the future of this resource. Growth will continue in the long-term.”
Sharabura’s comments provide context for the content that appears in this issue. Yes, the oil sands are an expensive and controversial resource. But there is still a lot of interest in developing them (as the $15.1 billion acquisition of Nexen Inc. by China’s state-owned Cnooc Ltd. in July demonstrates). And the kind of investment and activity required to double oil sands production by 2020, as the Canadian Association of Petroleum Producers is forecasting, means the oil sands ultimately touch just about everybody working in the oil patch.
In this month’s cover story about Suncor Energy Inc.’s new CEO Steve Williams (“Not the Million Barrel Man,”), we examine what the change in leadership means for the future of this oil sands giant.
The oilfield services sector also stands to benefit as in situ oil sands production grows in Alberta. Red Deer-based Predator Drilling (“Gathering Steam,”) is one of the service firms gaining a toehold in the thermal oil sands universe.
Meanwhile, interest is also building among Pacific Rim businesses looking to set up shop in the industrial hub of Nisku (“Calling Nisku,”). Clearly, they see some long-term business opportunities in the oil sands.
As Sharabura says, there will be ups and downs for the sector. But over the long haul, the ups figure to heavily outweigh the downs.
Errata: In the June issue of Alberta Oil, the figure that states Imperial Oil plans to produce 345,000 barrels of oil per day by 2020 is incorrect. The correct number is more than 600,000 barrels per day. We regret the error.