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Tar Sands/Oil Sands Decline May be Permanent, Analysts Say


Falling oil prices have throttled tens of billions of dollars in investment and reduced Canada’s future tar sands/oil sands production by 1.2 million barrels per day, and “some analysts say only a fraction of it will be resurrected,” the Globe and Mail reports.

With the fossil fuel sector reeling and budgets sapped, companies are “apprehensive about reviving costly blueprints in the face of rapidly shifting patterns of supply and demand, stubbornly high costs, and persistent export constraints,” the Globe explains. Particularly as diluted bitumen loses ground to “a flood of cheaper shale oil” in the United States and record volumes of low-cost crude from Saudi Arabia.

“A new technology has emerged, and so the incumbents who have made good money in the past doing things the old way are the ones who are threatened,” said analyst Samir Kayande. “It’s really the upstarts who have the potential for being the large, significant players in the future.”

“Over the long-term, analysts say, a slimmer production outlook will ease demand for multibillion-dollar pipelines designed to transport ever-increasing volumes of crude to Canada’s coasts, potentially delaying projects such as Enbridge Inc.’s Northern Gateway or TransCanada Corp.’s Energy East well into next decade,” Lewis writes. “There are questions, too, about the long-term viability of shale production, which requires constant investment to offset steep production decline rates.”