Oil at $30 would cost oilsands producers $33M a day
What a stupid failure of an industry.
Oil at $30 would cost oilsands producers $33M a day
Canada’s oilsands companies keep producing even as the latest market slide brings bigger losses.
U.S. crude has started the year in decline and is hovering around $30 a barrel, down more than 70 per cent from the high of 2014. At this level, the oilsands industry would burn through about $12 billion of cash a year as revenues fail to cover costs, analysts at Peters & Co., a Calgary-based investment bank, wrote in a report this week. That’s about $33 million a day.
So why not halt output to wait for higher prices?
It would take a plunge below $20 to justify shutting down larger projects run by producers including Meg Energy Corp. and Cenovus Energy Inc., according to Peters & Co.. That’s because curtailments can damage underground reservoirs in drilling operations and integrated companies need to keep feeding crude to their own refineries. Mining projects can cover costs with oil as low as $10 a barrel. Examples include Canadian Natural Resources Ltd.’s Horizon development, where there’s “no plausible scenario” for a shut in, Peters & Co. said.
West Texas Intermediate crude, the U.S. benchmark, slipped below $30 a barrel on Tuesday for the first time in more than 12 years amid a global oil supply glut. Canada’s heavy oil benchmark, which includes conventional production and bitumen and trades at a discount to the main U.S. grade, is hovering below $17 a barrel, implying a bitumen price of just over $10, according to data compiled by Bloomberg.
If prices stay this low, however, there should be a future supply impact as more oilsands project expansions scheduled to start up after 2020 get deferred, according to Peters & Co. Developments that are considered more likely to proceed next decade amount to 525,000 barrels a day of supply, while less likely projects add up to 705,000, the report showed.
Oil at $30 would cost oilsands producers $33M a day, analysts say | Calgary Herald
