Oilsands investment projected to reach record levels in 2012

Canada’s oilsands sector—and indeed, the country’s entire oil and gas industry—is headed for record capital investment in 2012, according to the Canadian Association of Petroleum Producers (CAPP) and data collected by JuneWarren-Nickle’s Energy Group.

Capital expenditures on oilsands projects are expected to be $20 billion this year, up from an estimated $19 billion in 2011, which surpassed the previous record of $18.1 billion set in 2008, says CAPP. That compares to oilsands projects’ capital expenditures of $13 billion in 2010 and $11 billion in 2009, according to the association.

“I think $20 billion is now a record,” says Martyn Griggs, CAPP’s manager of oilsands. “It certainly has been climbing since we had the financial downturn in 2007 and 2008. The maximum I ever got to for all of oil and gas including oilsands was $50 billion and for 2012 I’m now showing that number to be $55 billion.”

Griggs says the bulk of 2012 oilsands spending will be on established mines, with the exception of Cenovus Energy Inc., which does not have a mine but is expanding at Christina Lake.

Syncrude Canada Ltd. will probably see spending of about $3.5 billion on debottlenecking designed to improve production by 10 per cent, he said. (Syncrude and Royal Dutch Shell plc do not disclose production or spending plans; however, JuneWarren-Nickle’s Energy Group records indicate Syncrude will spend $3.75 billion this year with $2.65 billion of that on major projects.)

Suncor Energy Inc. is building Firebag 4 and its Voyageur upgrader, Canadian Natural Resources Limited is expanding its Horizon mine and Imperial Oil Limited is constructing the Kearl mine and the expansion, Griggs notes.

Meanwhile, Total E&P Canada Ltd. recently received federal approval to start construction on its Joslyn North mine and he expects spending there of about $1 billion in 2012.

Canadian Natural has approved about $2 billion in expansion of its Horizon oilsands mine, up from $540 million in expected spending for 2011.

Imperial Oil recently said its initial Kearl mine development is 87 per cent complete, and is progressing on schedule with expected start-up in late 2012. Planned capital and exploration expenditures are expected to be about $5 billion this year as the company enters the third year of a decade-long strategy to invest about $30 billion to $40 billion in growth projects. CAPP estimates Kearl spending will be $3 billion in 2012.

The balance of oilsands spending will be on a whole myriad of smaller SAGD projects such as those of MEG Energy Corp., Laricina Energy Ltd. and Osum Oil Sands Corp., Griggs says.

He expects spending will be evenly spread throughout the year.

Driving the growth is current oil prices that are currently about $100 per barrel WTI, Griggs says. “This is at a time when we’re supposed to be in some kind of recession, so I think there’s a lot of bullishness out there, that we need production and this is our contribution.”

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