‘We’ve got the fight in us’: oilsands leader
Canadian companies tout technology in battle for dollars in global marketplace
Canadian oilsands companies are touting their projects as longer-term, more predictable investments in an attempt to counter the increasing flow of capital toward leaner developments with shorter return cycles.
During an annual energy conference in Houston this week, oilsands representatives are highlighting what they say are competitive advantages of Canadian heavy oil producers, placing focus on technology improvements.
“We’re quite well positioned,” said Judy Fairburn, vice-president of business innovation at Cenovus Energy Inc., during a discussion Tuesday. “We’ve got the fight in us. Our business is competitive with light, tight oil.”
Fairburn said Cenovus brought down its break-even price across its operations in 2016 to US$45 per barrel, matching many shale producers. Other producers like Imperial Oil Ltd. and Husky Energy Inc. have also reported falling oilsands break-even prices.
She said the company has reduced costs at its steam-driven oilsands facilities by extending its wells to record lengths, injecting solvents to mobilize bitumen and improving its IT capabilities.
Others have seen similar improvements.
Ryan Lance, CEO of Conoco-Phillips, said the company had drastically reduced its cost structure at its U.S. shale operations by improving well performance and moving toward a more manufacturingbased production process. The company is now replicating those same tweaks at its oilsands development in Alberta.
“We’re seeing that same technology and innovation driving lower costs and greater opportunity. The challenge for our Canadian team is: how do you do that in just a two- to three-year cycle time?”
The company is a joint operator in the Surmont oilsands project, which recently completed an expansion that put it above 100,000 barrels per day production.
OPEC members have also begun talking up basins with longer lead time such as the oilsands and offshore basins — as they believe these long-life anchor developments are vital for the overall health of the industry.
During a news conference, Mohammad Sanusi Barkindo, secretary general of OPEC, said “we expect the tarsands in Canada to also continue to attract investment,” especially as demand for the commodity is not expected to plateau for years to come.
Fatih Birol, International Energy Agency’s executive director, echoed that sentiment, noting he expects the oilsands “to make handsome contributions to global oil production,” despite the shortterm lure of shale oil. “Now it’s a new dynamic, and we have to find a place for everybody — the cohabitation of Middle East oil, with shale and oilsands, according to the rules of economics, of course.”
Oilsands firms, for their part, have been busy selling their projects as a stable option for investors due to low decline rates. However, it is uncertain whether the message will catch on as most analysts have written off new oilsands megaprojects amid depressed prices.
Lance said that while oilsands provide long-term stable oil supply, such projects tend to be higher cost and therefore riskier. “So how many of these long or medium cycle projects can you stack up in your portfolio? You have to be really careful.”
Gains in oilsands productivity come as depressed prices, political fragility and uncertainty over long-term oil demand have caused investors to seek refuge in U.S. shale plays.
Alberta Premier Rachel Notley, who was in Houston to discuss her government’s climate policies, said more rigid environmental regulations would set up the province for growth in the future. “I think that what we need to do is plan a business cycle that is longer than, say, the current political cycle in the U.S.”