By Rebecca Penty
The era of megaprojects in Canada’s oilsands is probably over as crude is seen staying lower for longer, some of the biggest developers said.
Producers that envisioned multibillion-dollar expansions when oil was over $100 a barrel are now opting for bite-sized additions after a price crash shook the energy industry. While some production growth is still expected in a market rebound as companies cut costs with new technology, massive developments are on hold, according to executives from Suncor Energy Inc., Cenovus Energy Inc. and Meg Energy Corp.
“The years of large, multibillion-dollar projects are probably gone,” Alister Cowan, chief financial officer of Suncor, said Tuesday at the CAPP Scotiabank Investment Symposium in Toronto. Fort Hills, the $13-billion project being pursued by Suncor and Teck Resources Ltd., will probably be the last oilsands mine built for many years, he said. “We’re more likely into smaller, more modular-type projects.”
Energy companies have shelved megaprojects globally as they cut spending to survive a crude slump that’s approaching two years. Oil is down more than 60 per cent from its mid-2014 peak. While a rebound is expected, there’s a growing contingent of executives and analysts who believe abundant supplies globally will prevent prices from staying near their previous highs.
Producers in Canada’s oilsands, among the most expensive reserves in the world to develop, are depending on technology and process improvements to bring down costs significantly and to let them compete with cheaper U.S. shale over the long run.
Meg and Cenovus are looking at solvents to reduce the amount of steam used to get bitumen from their wells, Cenovus CFO Ivor Ruste and Meg CFO Eric Toews said at the conference. Suncor is experimenting with radio waves to potentially replace steam entirely, Cowan said. The company is trying to lower capital and operating costs in the oil sands by 20 percent to 30 percent and to cut greenhouse-gas emissions by as much as 70 percent.
Companies are also hopeful that in a market recovery they’ll be able to keep about half of the savings wrung out of the industry in the downturn, thanks to such things as reducing drilling times, Ruste and Cowan said. Currently Cenovus requires West Texas Intermediate crude prices around $45 to $50 a barrel to break even, comparable to some of the U.S. shale plays, Ruste said.
“Canada’s got a huge resource in the oilsands and we think with continued focus on innovation and cutting our costs, we will be a relevant contributor in the global economy,” Ruste said. “The oilsands are quite competitive and the top-quartile assets we’re in will remain competitive on a global basis.”