Canadian Operators Revive Oil Sands Projects

Companies are reviving projects in Canada’s oil-sands region, a sign that life is returning to an industry hit hard by the economic downturn.

Two major oil-sands projects received funding this week. The Canadian arms of ConocoPhillips and Total SA said they are funding an expansion of their Surmont joint venture, and Calgary-based Husky Energy Inc. said Thursday it will spend C$2.5 billion (US $2.4 billion) on the first phase of its Sunrise project.
Both projects are moving ahead because costs have fallen and returns are higher than a year ago. When oil prices neared $150 a barrel in the summer of 2008, labor and engineering costs skyrocketed as companies raced to lock-in oil-sands projects. But those projects turned sour as crude prices plummeted below $50 a barrel last year as the global economic and financial crisis took a toll.

The downtown has lowered the cost of materials and made labor more productive, as fewer projects require fewer workers and companies can chose from among the best available. And projects are profitable with oil near $80 a barrel.

Rigzone