Why it's different this time - the IHS sees continued growth in the oil sands but few greenfield projects on the horizon
Data analytics firm IHS had good news and bad news for Alberta's energy patch this week.
The good news:
- another one million barrels per day is expected to come online by 2025, driven by several major projects that are already under construction or being expanded
- operating costs have declined by an average of $10 per barrel since 2014
- expansion of existing in-situ operations could break-even at US$50 WTI
- very slow production declines make oil sands assets attractive to investors over the long term, even at lower oil prices.
The bad news:
- unless oil prices meaningfully recovery from here (which is not anticipated), future growth will come from expansion and debottlenecking of existing facilities; very large-scale few greenfield projects are anticipated in the short term
- lack of pipeline infrastructure will increase transport costs for oil sands producers, resulting in a significant headwind for the industry
- the industry is expected to continue its downward pressure on labour and construction costs, despite the recent rebound in oil prices.