Ninety percent of future oil sands projects at risk from eroding oil price


(Nov 2014) Investors in Canadian oil sands are at a heightened risk of wasting $271 billion of funding on projects in the next decade that need high oil prices of more than $95 a barrel to be profitable, the Carbon Tracker Initiative (CTI) revealed today, flagging faltering oil prices.

discovery stage oil sands curve


Figure 1 (click on the image to zoom in)
Figure: 2014-2050 potential future oil production by required market price (mmbbl, average kbbl/d)
discovery stage projects only
Source: Rystad, CTI

This Carbon Tracker’s new piece of research focuses on Canadian Oil Sands Capex and Production analysis and highlights that:

  • Recent oil price volatility shows the importance of stress-testing project economics against a range of price scenarios
  • Rystad have recently updated their methodology for calculating transport prices, as discussed in an accompanying note. We have therefore updated our look at oil sands project economics in this light
  • The vast majority (92%) of potential capex on discovery stage oil sands projects in the next decade has high oil price requirements which we would regard as particularly risky
  • Relative exposure to high cost oil sands development projects varies between companies, but can reach 100% of total company potential capex. We consider this an extremely high stakes gamble
  • A number of high cost oil sands projects have already been deferred this year, at rather higher prices than currently prevailing. Investors may question why similar projects are going ahead, given continuing cost pressures and an increasingly uncertain pricing outlook