Statoil Canada weighs investment in the oil sands against offshore investment

Rising costs put Statoil Canada in a tough spot

February 21, 2014

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When a company’s majority shareholder is the Norwegian government, which owns an $810-billion sovereign wealth fund, it doesn’t often need to make tough choices on where to spend its money – there’s usually more than enough to go around. But Statoil Canada chief executive Stale Tungesvik said in December that he faces a tough decision between immediately developing his company’s Corner oil sands lease and its deepwater Bay du Nord discovery offshore Newfoundland.

Tungesvik said that Statoil ASA, Statoil Canada’s parent company, is trying to keep costs down at its international operations, which may force him to choose – in the near term – between commissioning the Corner project and drilling more wells in the Flemish Pass basin. On the one hand, Statoil ASA in Norway has a 600-million barrel deepwater asset with tidewater access and, on the other, an oil sands asset which could produce 40,000 barrels per day for 40 years using steam- assisted gravity drainage techniques, which is becoming more cost competitive.

In January, Alberta Oil’s CEO of the Year Bill McCaffrey of MEG Energy said that the costs of in situ oil sands development are dropping, making oil sands extraction more competitive relative to other unconventional resource plays. “There’s a case to be made that with the technology that’s advancing, our supply costs could approach half that of the shale oil.”

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