CALGARY
Tue Mar 23, 2010 2:48pm EDT
(Reuters) - Only half the Canadian oil sands production forecast from projects proposed before the recession is still expected to come on stream despite a recent rebound in development activity, an analyst said on Tuesday.
Several companies, including Total SA (TOTF.PA), Husky Energy Inc (HSE.TO) and Devon Energy Corp (DVN.N) have announced in the past two months they will go ahead with new projects after more than a year of massive drop-offs in industry spending due to the recession.
But that is not enough bring production forecasts back to the level of those made during the boom of 2006 and 2007, said Jackie Forrest, director of global oil for IHS CERA.
"The outlook then, for projects that were in the queue, was something like two million barrels a day. Today, even with the announcements that we've had, we're about half of that," Forrest told the Reuters Canadian Oil Sands Summit.
In addition, the vast majority of recently announced developments are steam-driven "in situ" projects that will pump raw or diluted bitumen into the market, rather than mining projects with integrated upgrading plants, she said.
That means a reduction in development costs as well as a reduced need for workers. Before the economic meltdown, as many as 16,000 trades workers were imported from other parts of Canada and outside the country.
Forrest estimated that costs of materials such as steel and services such as engineering have fallen 10-15 percent from the peak, and when labor expenses are factored in the overall savings are even greater.
One of the biggest risks to development is uncertainty over government policy on carbon levies and CO2 prices at the federal level in Canada and the United States as well as in various provinces and states.
"Our view is there will be a cost to carbon at some point. The bigger issue is the number of different policies coming out in order to regulate carbon and the potential for them to charge for the same molecule multiple times," Forrest said.
Source: http://www.reuters.com/article/idUSTRE62M4M820100323
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