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Alberta’s Oilsands
Figure 1: Oil Reserves
our capital cost estimate to better reflect the anticipated cost for a
greenfield mining and in situ project with operations commencing in
300
2010 and terminating in 2040.
250
Proved oilsands (remaining)
Proved oilsands under development
Ongoing supply cost estimates using data for 2007 indicate that the
200
Proved conventional reserves
supply costs have not continued their rapid increase. Improvements in
capital cost estimating, sourcing labour and construction are helping to
150
264.2
stabilise supply costs.
Billion barrels
151.2
100
Projecting Oilsands Development
138.4
50
115
101.5 97.8
By the end of 2007 oilsands production had achieved record levels,
87 79.3
1.5
22
producing 1.32 million barrels of raw bitumen per day. Of this, 41% was
0
E
from in situ techniques, with the remainder coming from the large mining
Iran Iraq
w
ait
UA
Canada
Ku
Russia
operations. Almost a decade ago, the thought of Alberta producing
V
enezuela
Saudi Arabia
1 million barrels a day from oilsands was just a dream. Current projections
Figure 2: Historic Oilsands Supply Cost and Bitumen Prices
indicate that production could rise to more than five times the current
rate. However, as was the case a decade ago, we do not know what the
45
future holds and what may constrain production.
40
Projections of bitumen and SCO production from Canada’s oilsands
35 are typically based on the summation of all announced projects, with
assumptions pertaining to the project schedule and delays,
CA$/bbl
30
technology and state of development. CERI’s method by which
projects are delayed or the rate at which production comes on
25
stream is based on our past experience from monitoring the progress
of various oilsands projects.
20
15 Global energy markets and price expectations are not limiting growth
2003 2004 2005 2006
Alberta bitumen price AB CSS AB SAGD AB mine Average in situ
in production from the oilsands because global oil demand is at a level
that warrants further increase in production. Industry sources and
CERI’s own supply cost model indicate that a real West Texas
Figure 3: Unconstrained Projection Gross Crude Bitumen Production
Intermediate (WTI) equivalent price around CA$60–70 (over a project’s
production horizon of 30 years) is required in order for new or
7,000
2006 update – unconstrained
greenfield oilsands production to be economically viable. The marginal
6,000
2007 update – unconstrained
cost of current production is almost half that and indicates support for
current production levels continuing into the future. The industry’s
5,000
development is primarily determined by other limiting factors such as
4,000
capital spending, labour supply, market access, market uncertainty,
3,000
material supply, the environment and regulatory uncertainty.
2,000
T
housand of barrels per day To illustrate how plans for the oilsands have changed over a period
1,000
of one year, Figure 3 presents CERI’s 2006 and 2007 oilsands
projections with no constraints applied. As indicated, in the space of
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
one year new announcements for planned capacity helped to propel
the oilsands from 5 to almost 6 million barrels per day of production
Figure 2 has plotted historic supply costs in conjunction with by 2020. The dip in production in Figure 3 represents the end of life
nominal prices of bitumen in Alberta, as reported by the ERCB in phase of a mining operation (previously not accounted for).
their 2007 update.
6
Conventional crude oil prices in Alberta are
typically 40–60% percent higher than the bitumen price. While achieving such production levels would be an enourmous
accomplishment and help stabilise the supply of crude oil entering
As indicated above, CERI’s estimate for the supply cost of bitumen has the US, there are many challenges that are likely to prevent the
generally tracked the price of bitumen; however, after 2004 oilsands from achieving this level of production.
a widening between the estimated supply cost and bitumen price
started to take place. This was the result of rising labour and capital In all likelihood, some projects will be delayed for a few years by
costs in Alberta. Throughout 2006, CERI surveyed members of the regulatory, capital or labour hurdles, while other projects may be
oilsands industry in an attempt to better estimate the changes to cancelled for a period of time. These projections account for some
operating costs that had taken place since 2004. In 2007 we inputted constraints. Various delays and probabilities are applied to each of
the results from our survey into supply cost models and further refined the announced projects relative to their planned start-up date and
32
EXPLORATION & PRODUCTION – OIL & GAS REVIEW 2008 – VOLUME 6 ISSUE II
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