The oilsands industry was breathing something of a sigh of relief as 2008 began, as the Alberta government had rejected many of the contentious bitumen-related recommendations from its royalty review panel. The new royalty system took effect on Jan. 1, 2009, but no one seems to be talking about it very much anymore, at least in the oilsands space. That’s because they have bigger problems. Much bigger. In fact, as we enter 2009, parts of the industry are barely breathing at all.
Inflated oil prices drove huge increases in cash flow for Canada’s oilsands miners in the third quarter of 2008, but the price bubble popped late in the quarter, leading many integrated miners to pull back on future growth plans.
High oil prices and a narrow differential delivered strong operating netbacks to bitumen producers in the third quarter of 2008.
The Calgary-based Canadian Energy Research Institute (CERI) acknowledges troubling economic headwinds as the industry moves into 2009, but is not in a panic mode. CERI released its annual Oil Sands Industry Update in early November.
“The financial crisis is serious,” CERI senior economist Dave McColl said. “If the U.S. economy enters a big slowdown that could put the brakes on some development, but the resource will still be developed. It’s just a matter of time.”
CERI’s forecast remains an optimistic one, even in the face of increasing uncertainty.
The fall of 2008 was extraordinary. The global financial crisis suddenly went into warp speed. Nations desperate to soften the blow began an offense against collapsing capital markets, but their efforts notwithstanding, credit became scarce and more expensive. The business and political atmosphere quickly took on a sense of urgency, alarm, and panic that will certainly take many months and possibly years to resolve.
Amidst the gloomy announcement by Petro-Canada delaying its investment decision on the mining portion of the Fort Hills project into next year and shelving its upgrader entirely (the two together were pegged at $23.8 billion), and the partnership of EnCana and ConocoPhillips going ahead with a $3.8-billion conversion project at its refinery in Roxana, Illinois to allow for processing of more Alberta crude, financial analyst William Lacey of FirstEnergy Capital came out with a particularly thoughtful analysis in which he asked, “Has Alberta priced itself out of the market?”
Many oilsands producers were looking forward to the day when Alberta-based upgraders would turn bitumen into products such as diesel, jet fuel, and heating oil, significantly adding value. As a result of the global financial crisis, however, virtually all new upgrader projects and refinery expansions have been halted.
“We’re facing another form of biological warfare and it’s killing us off…. It’s genocide. They know it’s there, but they’re denying it.”
Name: Shawna Peters
How do you solve a problem like Oilberta? If environmental critics were cast in a musical, that could make an appropriate opening song. The moniker Oilberta, as well as the term “dirty oil,” have become damaging to the reputation of the province as a whole, although generally these terms only refer to the oilsands industry. Now, the province has a plan to fix its bleeding reputation, in the form of a $25-million, three-year campaign.
October 2008 was one of the worst monthly returns in both the crude oil and energy stocks in history. This is on top of the awful results in September and the continued weak economic results around the world. The results below show the carnage in the sector.
The Aboriginal connection: First in a series of three
The vast depth, expanse, and potential of outer space is almost impossible to wrap one’s head around. The same could be said for the massive resource represented in Alberta’s carbonate bitumen—possibly one reason why the Alberta Research Council (ARC) carbonate team calls itself the Carbonauts—a diverse group that sees a close analogy between its work and the U.S. race to the moon.
