Worst Seems Over for Oilsands
13/11/2009 | The Calgary Herald

Herald columnist Deborah Yedlin.

Between the capital markets being wide open, deals being done and more than $11 billion in capital expenditures announced for the oilpatch in the last couple of days, it’s starting to look like the worst of the downturn is over.

Some months back, former vice-chairman of Peters & Co., Wilf Gobert said that the fact Suncor had decided to put its Firebag project on hold was effectively the canary in the coal mine for the oilsands business. If Suncor couldn’t make the numbers work, said Gobert at breakfast hosted by Calgary Economic Development, no one could.

Today, with Suncor announcing it is re-starting activity on projects that were shelved suggests the oilsands world is at an inflection point in the cycle, and poised for an uptick.

That’s not say the coming year won’t have its challenges, especially given the natural gas glut, but the fact companies are raising money and not afraid to spend it, shows two important facts.

One, a measure of confidence is returning to the energy sector. Despite the still significant crude oil inventories, along with the fact that the Organization of Petroleum Exporting Countries has been gradually increasing its output, the futures curve for crude is still showing prices of $100 US per barrel a few years out.

The second is the long-cycle nature of the oil and gas business. By announcing that it is restarting construction on Stage 3 of its Firebag project, Suncor is doing exactly what needs to be done in order to meet future demand. And this won’t be the first time Suncor has taken a relatively big step amidst economic uncertainty, especially as it pertains to the energy business. Remember, this was the company that chose to proceed with its Millenium project, when oil prices were in the $12 US per barrel range in the late 1990s.

If anyone took a close look at the report issued by the International Energy Agency this week, it was very clear that the oilsands is going to play an important role in meeting future demand. Given that oilsands project don’t get finished overnight, both Suncor and the soon to be spun-out Cenovus are laying the groundwork to make sure they are positioned to benefit from what is expected to be a bigger draw on oilsands production.

The question now is how soon before other oilsands projects that were shelved or dialed back are back on at full speed.

Top Tags

The information contained in this correspondence is proprietary and confidential and is not intended to solicit investment funds in any jurisdiction. This correspondence and the information contained herein do not constitute an offer or solicitation for the sale of any product or securities of Fast Track Capital Inc. (operating as FTC Ventures Inc. in the province of British Columbia) or any of its current or future affiliates ("Fast Track"). Any formal offer of product or securities will only be accompanied by formal offering documentation or other definitive materials that have been prepared in accordance with applicable laws specifically for the purposes of making such offer. The information available within this correspondence is not intended to provide you with any financial, accounting, tax or legal advice. Neither Fast Track nor any of its employees or agents are financial or tax advisers. Accordingly, please consult your own advisers. This correspondence may contain forward-looking information with respect to Fast Track's projects and future results. Forward-looking statements often, but not always, are identified by words such as "anticipate", "believe", "expect", "intend", "should", "should be" and similar expressions have been used herein to identify forward-looking information. Actual results may differ from expected results for a variety of reasons including, but not limited to, economic and financial conditions in Canada and globally, regulatory developments in Canada and elsewhere, technological developments, competition and other factors beyond Fast Track's control. Fast Track makes no representations or warranties about accuracy or completeness of this correspondence or any of its contents, including, without limitation, the accuracy or timelines of its contents. Any implied warranties, whether statutory or otherwise, on any such matters are hereby expressly excluded to the full extent permitted by applicable law. Fast Track assumes no obligation to update or revise this correspondence or any forward-looking information to reflect new events or circumstances. In no event shall Fast Track or any of its trustees, directors, officers, employees, agents, affiliates or subsidiaries (the "Fast Track Group") be liable to you or any other person or entity for any damages (whether general, direct, indirect, special, punitive, exemplary or incidental) arising directly or indirectly out of the use or content of this correspondence, even if any of the Fast Track Group have been advised of the possibility of such damages. Any reproduction of this correspondence without written permission from Fast Track is prohibited. Recipients agree not to disclose its contents to any third party.