Canadian Oil Sands Supply Costs and Development Projects (2011-2045)
Released March 2012

In 2011, global economies experienced some growth, albeit not at the rates that were predicted.  Prices of oil were in a range where new oil sands projects became economic again. However, producers remained anxious about future oil price estimates and were proceeding at a more balanced pace in order to better control costs. This approach should help them avoid a repeat of the high cost inflation environment that resulted from peak investment spending in 2007 and 2008 associated with the concurrent development of several large oil sands projects.

The industry’s challenge today is to manage this “second boom” more efficiently and in a more sustainable manner than the “first boom”. Costs have to be better managed and environmental performance has to improve continuously. It is the year 2012, and the debate on how the oil sands industry should develop continues to dominate the news. The debate is polarized and emotionally charged. The recent rejection of Keystone XL may seem like the worst and the biggest hit against Canada’s oil sands yet, but it is likely that similar protests will become the new norm. As the hearings continue for Enbridge in its quest to build the Northern Gateway pipeline to start shipping bitumen to the West Coast, industry should prepare itself for a new myriad of attacks. The time has come for the industry to engage in oil sands discussions that are factual and balanced and not sprinkled with exaggerations and/or myths. Collaboration among industry players and with various agencies – government and environmental – is the key to moving forward and breaking the fear and hostility among environmentalists, NGOs and the general public.

This is Canadian Energy Research Institute’s (CERI’s) seventh annual oil sands industry update, examining production, supply costs, and constraining factors for oil sands development. CERI monitors and reviews all the sands projects (used in the unconstrained case), and also develops a more realistic assessment – the CERI Reference Case Scenario – based on likely timing conflicts, contingencies, and project delays and deferrals. From the Reference Case Scenario stem the projections of production, investment, royalties, natural gas requirements, GHG emissions and demand for diluent, as well as supply costs for SAGD, surface mining recovery, and bitumen upgrading.

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