Oilsands investments at risk from low crude prices, report finds

Some of the world's costliest energy projects are in Alberta's oilsands and some could be cancelled without higher oil prices, according to a new report by Carbon Tracker Initiative. (Jeff McIntosh/Canadian Press)

Some of the world's costliest energy projects are in Alberta's oilsands and some could be cancelled without higher oil prices, according to a new report by a financial think-tank that focuses on climate risk.

The study by the Carbon Tracker Initiative highlighted 20 of the biggest projects around the world that need a minimum oil price of US$95 a barrel to be economically viable.

Most on the list require prices well north of US$110 a barrel and a few in the oilsands even need prices higher than US$150, said the report.

Crude for September deliver was trading at around US$97 a barrel in New York on Friday.

View the Carbon Tracker Initiative Fact Sheet

In total, the 20 projects represent close to $91 billion in capital spending over the next decade.

The report's authors question whether those funds should be invested in risky projects.

"This analysis demonstrates the worsening cost environment in the oil industry and the extent to which producers are chasing volume over value at the expense of returns," said CTI analyst Andrew Grant.

"Investors will ask whether it is prudent for oil companies to bet on ever higher oil prices when they could be returning cash to shareholders."

High on the list were Houston-based ConocoPhillips' oilsands operations, which include joint ventures with Cenovus Energy Inc. (TSX:CVE) at Foster Creek and Christina Lake and with Total E&P Canada at Surmont.

A spokeswoman for Cenovus, which operates Foster Creek and Christina Lake, questioned how CTI came up with its figures, as its steam-driven projects have supply costs between just US$35 and US$65 a barrel.

CTI also flagged Shell's Carmon Creek project and ExxonMobil's Aspen and Kearl projects.

Other pricey projects highlighted in the report were in deepwater or ultra deepwater off West Africa and Brazil, as well as in the Arctic.

In May, Total and partner Suncor Energy Inc. (TSX:SU) decided to indefinitely defer their $11-billion Joslyn North mine in Alberta because the economics just weren't good enough.

And in June, the Canadian Association of Petroleum Producers predicted oilsands production would grow at a slower pace than previously expected because of rising costs and capital constraints.

It sees output hitting 4.8 million barrels a day by 2030, about two and a half times higher than last year's output of 1.9 million barrels.

But the figure is 7.7 per cent lower than the 5.2 million barrels of daily oilsands output CAPP predicted for the same time frame last year.

The CTI, funded by a range of European and American foundations, describes itself as a not-for-profit organization "set-up to produce new thinking on climate risk."

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