Resource World Magazine

64 www.resourceworld.com O C T O B E R / N O V E M B E R 2 0 1 7 Oil Patch Report by Bruce Lantz W hat do you get when you take one of the world's great oil sands, ravage its core by fire and then subject it to an industry-wide downturn? A wasteland? Not by Alberta's measure. While the Alberta oil sands is still reeling from the downturn that started in 2014, and while Fort McMurray may never totally regain the stature it enjoyed before the wildfire that leveled much of it, experts say the oil patch will continue in one form or another. Of course, to do that will require some deft stickhandling through a myriad of policy and regula- tory challenges led by Prime Minister Justin Trudeau, who in January called for a "managed decline" in the oil sands and less dependence on fossil fuels. "The Alberta oil and natural gas industry continues to face significant… challenges at both the provincial and fed- eral levels that are impacting the industry's ability to attract the investment necessary to grow and generate jobs and prosperity," said Elisabeth Besson, Media Relations Advisor with the Canadian Association of Petroleum Producers (CAPP). Crude oil prices have dropped from more than US $100 per barrel in 2014, due to a global oversupply of oil, to under US $50. CAPP estimates 2017 producer capital spending for oil sands projects will decline for the third consecutive year, reflecting continuing uncertainty. Drilling by conventional crude oil pro- ducers is expected to increase by 70% compared to 2016 but would still be 40% lower than in 2014. Western Canadian crude, the bulk of Canadian crude oil sup- ply, is forecast to grow from 3.9 mb/d in 2016 to 5.4 mb/d in 2030. Oil sands proj- ects further out face greater uncertainty, which is reflected by deferred startup timings. Those problems, coupled with chal- lenges from environmentalists, some First Nations, and others who want to see the role of oil and/or gas and its associated infrastructure (i.e. pipelines, refineries, LNG plants, for example) in our lives diminish or disappear, have fostered concerns among many and some gleeful predictions of the industry's demise. And, oil sands projects are notoriously expen- sive and prone to delays and cost overruns. "As the industry adjusts to these chal- lenges, the prospect for long-term supply growth can be fostered through increased competitiveness, including achieving bet- ter market access," said Besson, who said the future remains "unclear" due to price and market access uncertainty. "Global oil and natural gas markets are constantly evolving, and competition for North American market share has inten- sified, placing Canadian producers at a disadvantage," she said. "In addition, gov- ernment policy decisions and uncertainties within Canada are undermining investor confidence at a time when the US, our larg- est competitor, is actively encouraging oil and natural gas investment. "It is evident that a rebound of Canada's upstream oil and natural gas industry can- not be expected to be driven solely by an increase in commodity prices, as the future paradigm companies are facing is a lower price range with higher price volatility and uncertainty with increased competi- tion for market supply." Thus came the 2012 formation of Canada's Oil Sands Innovation Alliance (COSIA) solely member-funded to tackle the challenge of improving the industry's environmental performance. The players in this effort are BP Canada [BP-NYSE], Canadian Natural Resources [CNQ- TSX], Cenovus Energy [CVE-TSX, NYSE], ConocoPhillips Canada Resources [COP- NYSE], Devon Canada [DVN-NYSE], Imperial Oil [IMO-TSX, AMEX], Suncor Energy [SU-TSX, NYSE], Syncrude Canada and Teck Resources [TECK.B- TSX; TECK-NYSE]. They also have about 40 associate members that include mul- tinationals, academic institutions and innovation hubs. These companies share intellectual property and collaborate on the development of new technologies to accelerate environmental improvements, said Chief Executive Dr. Dan Wicklum. "COSIA can tackle challenges that are important to solve but that may be too big for one company to tackle on their own," he said, suggesting more can be done if they work together and share technolo- gies, information and ideas for change in four priority areas: water, land, tailings and greenhouse gases. "By drawing on each other's tech- nology expertise, COSIA members are finding innovative answers to the indus- try's toughest challenges, faster." Bringing "the best people together to work in the best ways," Wicklum said, allowed COSIA to set challenging goals that can take the industry from where it is now to where it wants to be, launching more than 276 active projects and sharing nearly 1,000 technologies and innovations that cost almost $1.33 billion to develop. "For example, one of our goals is to decrease freshwater consumption 50% by 2022 for in-situ operations. COSIA members with in-situ operations have Alberta oil sands projects – adjusting to challenges

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