Low oil prices threaten expensive oil production, if only because operators of certain remote or technically fraught plays still have to turn a profit to keep the crude flowing. But even in the face of sub-$50 per barrel crude, Canada’s oil sands—a favorite punching bag of the greens for their admittedly dirty production process—still seem ready for business. Bloomberg reports:
Even with crude down 52 percent since June, output will grow 3.5 percent this year from the world’s fifth-biggest producer. The Canadian dollar is near a six-year low and materials cost less, helping oil sands producers cut costs and keep pumping. Oil would have to stay between $30 and $35 a barrel for at least six months, down from about $50 now, before wells shut, according to the Canadian Energy Research Institute. […]“We are above the price where existing projects” get shut down, Robert Johnston, chief executive officer of risk consultants Eurasia Group, said in Calgary Feb. 4. “Even projects that are under construction will continue.”
There’s been some concern that today’s bear market would cut into a lot of oil sands production and therefore undercut the case for building the Keystone XL pipeline (that would transport that oil to American Gulf coast refineries). But it seems that those worries have been overblown, as our northern neighbor’s already prodigious output is expected to grow this year. Not only are the involved firms intent on staying the course in formations where they’ve already invested in the requisite infrastructure, but there are also signs that new oil sands construction is on the way.Another day, another dubious argument against Keystone debunked.