Low crude prices leave many Canada oil sands producers in the red

Wed Dec 16, 2015 3:40pm EST
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By Nia Williams

CALGARY, Alberta Dec 16 (Reuters) - U.S. crude's slide to $35 a barrel this week has left many Canadian oil sands producers selling their oil at a loss, with some analysts predicting even more pain in 2016.

Alberta's oil sands hold the world's third-largest crude reserves but also have some of the highest breakeven costs globally because of energy-intensive production methods.

Canadian heavy crude trades at a discount to U.S. crude because of quality and the cost of transportation from landlocked Alberta to U.S. markets.

The differential is currently steady near $13.75 a barrel, putting the outright price of Canadian heavy at around $22 a barrel, near a decade low.

Still, oil sands projects are unlikely to shut down because of the billions of dollars already sunk into them.

ARC Financial analyst Jackie Forrest said at current prices thermal oil sands projects are losing around C$1 ($0.7259) a barrel, while mining operations are bleeding roughly C$3 for every barrel produced.

"There are definitely producers at this price who are losing money. They are not even covering variable costs associated with producing bitumen, blending it and sending it down the tracks," she said.

Companies also have to contend with other expenses including debt servicing and administrative fees.   Continued...