Oil sands projects remain highly profitable for operators and governments and highly promising as a source of oil supply, according to an annual study by the Canadian Energy Research Institute.
The study estimated the constant-dollar oil price needed to recover all capital expenditures, royalties, and taxes calculated at a real discount rate of 10%/year, which it called equivalent to a nominal return of 12.5%/year based on an inflation rate of 2.5%/year.
For hypothetical projects in the study, that price, which CERI calls supply cost, is $44.75(Can.)/bbl of bitumen for steam-assisted gravity drainage, $89.62/bbl for mining integrated with upgrading, and $61.05/bbl for mining alone.
The supply costs, in prices equivalent to West Texas Intermediate crude oil after adjustments for blending and transportation, are $64.62/bbl for SAGD, $91.07/bbl for integrated mining and upgrading, and $81.51/bbl for stand-alone mining.
The study said the province of Alberta receives an average royalty of $8.50-12.20/bbl over the life of an oil sands project.
It projected bitumen production in three scenarios.
In the high case, production from mining and in situ operations increases from 1.5 million b/d in 2010 to 3.9 million b/d by 2020 and to 6.2 million b/d by 2045.
In the reference case—“a more plausible view,” according to CERI—production grows to 3.3 million b/d by 2020 and 5.4 million b/d by 2045.
And in a low case, bitumen production is 4.1 million b/d by 2030 and 4.6 million b/d by 2045.