Alberta’s oil sands are still open for business

March 23, 2009   by Joe Terrett, Editor

The 797B Caterpillar mining trucks used at Shell’s Athabasca oil sands carry 400 tonnes of bitumen.
Photo: Shell

The global economy may be in meltdown, oil prices are at record lows and some massive development projects have been put on hold, but Alberta’s oil sands market is still open for business.

The good news for the 600 Canadian (and some international) delegates who attended the third National Buyers and Sellers Forum in Edmonton Feb. 10 to 12 was, there’s more than $30 billion worth of annual capital investment and maintenance spending, which is higher than last year and about double what was spent in 2006.

But they were reminded the recession will likely last longer and run deeper for manufacturers than current forecasts indicate. CME president and chief economist Jayson Myers said in his keynote address the much-anticipated recovery won’t materialize before the financial markets sort themselves out, and credit and liquidity are flowing again. The US and Canada have weighed in with stimulus packages [US$787 billion and $39.9 billion], but Myers predicts they represent the “first round” and more money will likely be needed.

In the meantime, he said manufacturers should prepare for recovery by re-evaluating their businesses. Be ready, he said, because the economy will come back “very sharply.” Cash management will be key. He advised manufacturers to make investments in technology, focus on improving productivity and eliminate waste.

Reducing costs

The economic downturn and collapsing commodity prices have forced major oil sands players, such as Suncor Energy and Shell Canada, to ease up on development plans. They’re looking for ideas and action from suppliers that will reduce costs and improve productivity.

Suncor, the biggest investor in the Athabasca oil sands development, was planning to make $9 billion worth of capital expenditures this year, but Bart Demosky, vice-president of business services, said spending has been cut back to $3 billion until oil prices reach a “mid-level” and financial markets stabilize. He said the Voyageur upgrader expansion and Firebag phases 3 to 6 have been put into “safe mode” so they can be revved up again quickly when market conditions change for the better. In the meantime, Suncor is producing 300,000 barrels per day, and he said when the market returns, production will be ramping up to 550,000 barrels, which offers “tremendous opportunities for suppliers.”