Alberta oil sands investment to recover by yearend

Guntis Moritis
OGJ Production Editor

CALGARY, July 15 -- The expected economic recovery in developing the oil sands in Alberta may start in late 2009 or early 2010, said Robert J. Mason, managing director, head of oil sands, investment banking, global energy, and power group, TD Securities Inc., Calgary.

“Some producers are thinking about restarting projects because oil price forecasts are more definite,” Mason said, speaking July 14 at PennWell Corp.’s Oil Sands & Heavy Oil Technologies Conference & Exhibition in Calgary. He added that capital cost have come down by 30% in the last 9 months.

Projects he thought might be slow in restarting are those involving upgraders. Upgrader projects are still in question with some deferred and others cancelled, he said.

Mason noted that since fall of 2008, development activity has been in a “pause and evaluate” mode because of low oil prices, lack of available financing, high borrowing costs, and inability of small companies to raise capital.

One higher cost the companies will have to contend with is the cost for handling carbon emissions. He said in past years, companies had expected this cost to add 25-30¢/bbl but now additional costs of $2-3/bbl are more likely.

Labor forecasts have also come down. He noted that projections are that new projects will need 25,000-28,000 fewer workers if the pace of development is as slow as now expected.

Contact Guntis Moritis at guntism@ogjonline.com.

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