The global economy may throw a few curve balls, just as it did in the 1980s
I suggested recently in this space that the Canadian petroleum industry is more politicized than at any time since the 1980 National Energy Program, although the politics are different. Then it was the fight between Pierre Trudeau’s Ottawa and Peter Lougheed’s Alberta over sharply higher prices. Now, it is the Harper government’s energy-superpower visions versus a transnational environmental movement that wants to block pipelines and kill the “dirty” oil sands.
In one respect, however, there is a considerable similarity between the Harper Conservatives and their dirigiste counterparts of 30 years ago: Both projected a boom in oil sands production. How great a danger is there that Mr. Harper’s aspirations may be undone — as were 1980s projections — by a market downturn?
Oil from the oil sands, whether mined or produced underground by heat injection, is, due to its elaborate production process, expensive oil. With current world prices flagging, Canadian oil subject to further discounts due to pipeline constraints, and considerable global economic uncertainty, might Mr. Harper’s strategy come undone?
The Canadian Association of Petroleum Producers projects that oil sands output will rise from 1.6 million barrels per day (mbd) currently to five mbd by 2030. However, that surge depends on prices considerably above current depressed levels. A recent report from Wood Mackenzie suggested that a number of oil sands projects, including new plants by Cenovus, Suncor and Total, as well as an expansion by Canadian Natural Resources, could be “prone to delay” due to current price uncertainty.