Page 4 - NorthAmOil Week 09

NorthAmOil COMMENTARY NorthAmOil
Hopes and fears for Canada’s oil sands
Questions remain over the future of the oil sands, with some projects better positioned than others to proceed
ALBERTA
WHAT:
Expectations for the future of Alberta’s oil sands industry are mixed.
WHY:
Teck Resources’ withdrawal of its Frontier application has thrown the industry’s future into the spotlight.
WHAT NEXT:
In situ expansions are more likely to go ahead than mining projects and new developments.
THE fallout from Teck Resources’ withdrawal of its application to build the Frontier oil sands mine continues. (See NorthAmOil Week 08) The decision has thrown the future of the oil sands industry into the spotlight, sparking debate over what the prospects are of other new projects proceeding.
Teck’s withdrawal happened days before the Canadian government was due to announce whether or not it was approving Frontier. It remains unknown what Ottawa’s decision would have been – the withdrawal took the pressure off Canadian Prime Minister Justin Trudeau to make an announcement that would have been controversial whichever way it went. And this lack of clarity could lead other oil sands produc- ers to hold off on proposing new projects at a time when the oil price environment is already causing them to be hesitant.
Indeed, it emerged this week that Teck is not the only oil sands player to have backed down from a project that is already under regulatory review. The Globe and Mail reported that MEG Energy had asked the Alberta Energy Regula- tor (AER) for a three-year delay to the approval process for a new oil sands project. The request, made in late 2019, was attributed to “continuing difficulties”, including a lack of takeaway capacity
in the province. It comes as around 20 other oil sands projects have been approved but have yet to go ahead, with their developers waiting for improved economics and additional pipeline capacity. These projects are estimated to have the potential to add up to 2mn barrels per day (bpd) of oil sands output, but such a surge in produc- tion could threaten any gains to crude prices, as well as rapidly filling up any new pipeline capac- ity that comes online.
Advantage
Some new oil sands projects could have more advantages than others as their developers con- sider how they should proceed. Teck’s cancella- tion of Frontier has been described by some as a potentially fatal blow to oil sands mining, while in situ projects are considered to be more likely to proceed, especially if they are expansions of existing facilities.
Oil sands mining has a considerably larger footprint, requiring the clearance of forest and the construction of large tailings ponds for wastewater from operations. In situ projects, by contrast, involve wells and the injection of steam into the ground in order to pump oil to the sur- face. Such projects tend to be smaller, cheaper and faster to build, and new technology can
P4
w w w . N E W S B A S E . c o m Week 09 05•March•2020