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$500 billion and counting - a look at oil sands expenditures over the past 60 years

$500 billion and counting - a look at oil sands expenditures over the past 60 years

2014 was truly a record-breaking year for the oil sands. A total of $64 billion was spent for the full year - $34 billion in capital, $24 billion in operating expenditures and almost $6 billion in royalties.

Since commercial operations first began in the early 1960s, expenditures in the oil sands have topped $500 billion. Most of that amount, about $440 billion worth, has been spent in the past 2 decades alone.

That's nominal dollars, not adjusted for inflation.

Historically, capital spending accounted for most of the expenditures, split evenly between mining and in-situ operations. However, more capital funds are expected to be directed towards in-situ going forward, as it is unlikely any large greenfield mining operation will be built in the near term after Fort Hills. At least, not until oil prices recover substantially.

 
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Royalty payments have also been evenly split over the past 2 decades. Royalties are a function of the volume of bitumen produced and realization price and therefore do not apply to upgrading facilities.

Mining operations suffer more wear and tear and clearly have higher operating costs. However, the cost of natural gas is a big input for in-situ producers. Historically, oil prices have averaged roughly 6 times the cost of natural gas, but that relationship no longer holds due to an excess of gas production in North America. The large spread between crude oil and natural gas prices has provided a good cushion for in-situ producers.

 
mining-in-situ-upgrading-expenses.png
 

The numbers for 2015 aren't fully tallied yet, but surely won't be anywhere near as good as previous years. Capital spending has declined from a record $33 billion in 2014 to $25 billion in 2015 and likely to be closer to just $17 billion this year.

Despite the declines, the figures are still jaw-dropping.

Over the next 20 years, the Canadian Energy Research Institute (CERI) estimates the Alberta oil sands will pump $4 trillion into the Canadian economy, including $1.2 trillion in taxes and royalties. 

Although low oil prices and higher taxes may have dampened that outlook slightly, no other private-sector in Canada puts that much money into the economy. It will be interesting to see the impact of lower oil prices and regulatory uncertainty on capital spending going forward.

Overall oil sands expenditures by type (operating, capital and royalties) for Bitumen Production facilities are posted under the "Project Data" menu. The breakdown for mining, in-situ and upgrading facilities are posted on their respective summary pages.

Expenditure figures are provided by CAPP (Canadian Association of Petroleum Producers) and will be updated annually.



SOURCES:
CAPP | ENERGY STATISTICS HANDBOOK (2015 DATA)
CERI | CANADIAN OIL SANDS SUPPLY COSTS AND DEVELOPMENT PROJECTS (2015-2035)
Alberta drags national GDP lower, but the rest of Canada ain't so hot either

Alberta drags national GDP lower, but the rest of Canada ain't so hot either

CNOOC blames Canada for its first-ever half-year loss

CNOOC blames Canada for its first-ever half-year loss

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