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No panacea in Petro-Can-Suncor deal

Oil sands are just too expensive at current crude prices


 

It’s official: Oil sands giant Suncor Energy Inc. has agreed to buy Petro-Canada for $19.3 billion, a record takeover that will create Canada’s largest energy company. Not that it will solve any of the malaise being felt in Alberta’s oil patch. The fundamental problem remains–oil sands are just too expensive at current crude oil prices, no matter how big you are. “In the end,” writes the Wall Street Journal‘s Keith Johnson today on the Environmental Capital blog, “Canada’s oil sands are at the fringe of oil production anyway: The combined company’s oil sands production represents less than 10% of Canada’s total crude production, which in turn accounts for only about 4% of global output. What’s important about Canadian production is that it represents a rare potential growth area among non-OPEC countries; places like Mexico, Russia, Norway, and Central Asia are all seeing steady declines in output.” What we need for an oil sands surge, Johnson adds, is $100 oil; don’t hold your breath.

The Wall Street Journal


 
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No panacea in Petro-Can-Suncor deal

  1. Funny, if memory serves me correctly I can remember in the 60’s and 70’s the oil lobby were pitching the oil sands saying if prices would just get up to 30 a barrel(the going rate at the time was about 15), it would be full steam ahead for the tar sands. Well, the speculators have ratcheted the price back up to nearly 50 a bbl. by slashing production and hiding super tankers filled with crude offshore. Anyone doing the math, factoring in taxes and exchange rates, can easily figure out Canadian consumers are being gouged by roughly 25% compaired to American consumers. Seems we are already paying a carbon tax that is going straight to the oil companies. No wonder Canadians have no stomach for another carbon tax to engorge the feds coffer’s and Al Gore’s. Having said that, I ask the question, with crude at close to 50 bucks, and profit margins for the oil companies at an all time high(wait till the embarresment of riches when 1st quater profits are reported), what is the problem? Why did the oil sands suddenly become unprofitable because crude is no longer way over 100 a bbl. It was only above 100 for a very short period of time, so why is it so unviable all of a sudden. Excuse me for being so cynical about the “plight” of the poor oli companies. I guess they see all the bailout money the banks and cars companies are getting and will soon being putting on the poor mouth and will be lining up for grants and tax concessions.

  2. This is big since it combines a solely upstream oil with a predominately downstream company. Suncor can use Petrocan’s conventional oil assets to ride out the oil price slump and use both their oil sands assets once oil rises again. With the banks becoming more toxic to invest in, commodities may once again become benefactors as investors look for “undamaged goods”. $65 dollars a barrel will spark interest in oil sands production; $75 will expand existing production; above $85 and let the good times roll again. It’s not unrealistic to see inflated oil prices again in the near future.

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