Canadian oilsands and frontier development will be hampered by low oil prices and limited supply of international capital, says the Canadian Energy Research Institute (CERI), Calgary.
As a result, conventional exploration and development is likely to be the focus of attention for the Canadian industry for a long time.
Meantime, Suncor Inc. asked governments for tax and royalty breaks to attract partners for a new oilsands mining operation in Alberta.
The company, which operates an oilsands plant at Fort McMurray, Alta., said it needs a partner to help finance a new mine about 3 miles from its present site. Suncor says governments should reduce their take to make the project more attractive to investors. The company figures it has paid about $1.5 billion in royalties and taxes to governments during the past 25 years.
MEGAPROJECTS ON HOLD
"Large scale, capital intensive megaprojects and frontier development will have to await either a firming of prices or a significant breakthrough in process and production costs," says Tony Reinsch, CERI vice-president.
CERI expects the price of West Texas intermediate to end this year at $20-21 (U.S.)/bbl. It forecasts a price rise to $22.50-23 in the mid-1990s and a slow increase for the balance of the decade.
The forecast assumes members of the Organization of Petroleum Exporting Countries will increase production to match demand growth, and supply and demand will remain in balance.
A 1990 forecast by CERI projected higher prices before it became clear key OPEC members could increase production without significant capital outlays.
CERI's latest market outlook expects a North American recession to end in the fall, but low consumer demand will hamper recovery. Limited international capital will push up interest rates and weaken a recovery.
Reinsch said technological advances and increased operating efficiency could reduce a decline in non-OPEC production.
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