Tar Sands/Oil Sands Projects Going Nowhere Fast, BP Warns
Development and production costs in Canada’s tar sands/oil sands aren’t falling fast enough to bring projects back to profitability, a senior executive with BP said this week, even with the country’s economy in recession and its currency steadily weakening against the U.S. dollar.
“There is an enormous amount of cost coming out of these projects,” BP’s Head of Exploration Richard Herbert told a conference in Banff, Alberta. But costs are still high enough that the company’s own projects in the tar sands/oil sands aren’t “going anywhere very fast at the moment.”
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Companies like BP and Royal Dutch Shell “have responded to slumping oil prices by cutting spending and selling assets. Costs have fallen about 15 to 20%, after rising threefold over the past 15 years,” Bloomberg reports. But “oil prices that have tumbled 50% in a year have further to fall, and won’t recover any time soon as supply swamps demand, “ according to BP’s regional vice president for Europe, Peter Mather.
On the same day, Reuters reported that French oil company Total was “trimming its exposure to Canadian oil sands projects amid a slump in oil prices” by selling one-tenth of its Fort Hills project to Suncor Energy.
“The sale, which is subject to regulatory approval and expected to close by the end of the year, would give Suncor a 50.8% stake in Fort Hills,” with Total retaining 29.2%, correspondents Mike De Souza and Nia Williams write. “Suncor expects to spend an additional $1 billion on Fort Hills as a result of the deal, including $700 million in remaining project outlays.”
Reuters says Suncor calculates the project’s capital intensity at $84,000 per “flowing barrel of bitumen.”