Crude reality: international oil majors step away from Canada’s oil sands reserves – Lexpert

Shawn Denstedt, QC

Mar 7, 2017

A recent Lexpert article looks at why some international oil majors have been walking away from Alberta’s oil sands and seeks to find out if they will be back. To gain insight for the article, Sandra Rubin turns to energy law experts, including Shawn Denstedt Q.C., an Osler energy partner and the firm’s national Co-Chair.

“[I]t’s been a bit of a dose of reality” in Calgary, says Shawn, who adds that the oil sands had become overheated in recent years. “At the height of the boom, if you had the name ‘oil sands’ in the name of your company, you were off and running on the stock market because it was the flavour of the month. It’s not anymore.”

According to the article, oil-sands companies have been working hard to develop new technology to make bitumen extraction less expensive, which, with sector consolidation and contraction decreasing labour prices, is helping to increase the oil sands’ competitiveness. 

However, as Shawn points out, not all oil-sands reserves are created equal, and, as the article states, some areas on the fringes of good-quality reserves are of marginal quality, making bitumen expensive to extract.

“The shadow of the boom that was cast over the oil sands is only now lifting, and people are only now looking underneath the shadow and saying a lot of this is uneconomic,” says Shawn. “It looked like there was going to be lots of development in fringe areas, but that’s not going to happen and never was going to happen.” Shawn also tells Lexpert he believes oil would need to hit the US$120 or US$130 a barrel mark to make those marginal-quality reserves profitable. But for existing producers with good-quality projects, the decreased cost of production means they can be “very profitable” at US$55-$68 a barrel, attracting interest again, says Shawn.

For more information, read Sandra Rubin’s full article “Crude reality: international oil majors step away from Canada’s oil sands reserves” in Lexpert.