There are dozens of approved oilsands projects that could be built in the wake of the shelving of the Frontier oilsands mine this week but analysts say they won’t be built until more export pipeline capacity comes online.
The application withdrawal for the 260,000-barrel-per-day Frontier project by developer Teck Resources Ltd., nine years after it first applied for regulatory approval, means that existing producers with approved projects or those planning expansions have a decided advantage over new entrants, said oilsands analyst Phil Skolnick of Eight Capital.
Developers of in situ projects — where steam is injected to produce heavy oilsands bitumen through wells — also have a leg up over projects where the bitumen is accessed through open pit mining, he added, because their projects tend to be smaller, make money with lower oil prices and usually need only provincial approval.
“It seems like the in situ ones have an easier time getting over the goalposts,” he said.
“With the mining projects, the economics are tougher to make work, especially in light of how the oil price outlook has been dramatically reduced… since late 2014.”
Oilsands output could grow by as much as 1.3 million bpd, he estimated, but that’s contingent on a number of factors: building both the Trans Mountain pipeline expansion and Line 3 replacement pipeline, increasing crude-by-rail capacity by a third and cancelling Alberta’s oil production curtailment program.
In a recent letter to the Alberta government, Federal Environment Minister Jonathan Wilkinson said he estimates 2.7 million bpd of oilsands growth is planned or under construction. He warned that growth could potentially take emissions from the sector above Alberta’s 100 million tonne legislated annual limit by 2030.
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