Alberta pension manager AIMCO urges oil sands to adapt to $70 crude

Tue Dec 2, 2014 3:37pm EST
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By Nia Williams

CALGARY, Alberta Dec 2 (Reuters) - The outgoing chief executive of Alberta Investment Management Corp (AIMCo), said on Tuesday oil sands producers need to cut production costs through new technology as $70 crude is here to stay.

Leo de Bever, who is stepping down from the C$80 billion provincial pension fund administrator after six years at the helm, said he would be surprised if oil topped $70 in the long-run given rising global supply, even if it rebounded to $100 per barrel at some point.

Oil sands producers in Alberta have some of the highest costs in the world. While they can cope with crude prices around current levels, de Bever warned future growth would be difficult unless companies invest in more efficient processes.

Oil at $70 a barrel "is probably something you should target for your technology in terms of being able to survive," he said.

"If you are existing producer in the oil sands you probably say this does not really affect me, as long as your physical plants hold together. But if you need to build something new, you're out of business."

The Canadian Association of Petroleum Producers forecasts oil sands production will hit 4.8 million barrels per day by 2030, up from around 2 million bpd currently.

But new mining projects require oil prices of around $115 to break even, while the break-even price for new thermal projects ranges between $50-$70, according to consultancy Wood Mackenzie. If these estimates are correct, some proposed projects may have to be shelved.

Competition from the U.S. shale boom is also causing problems for the Canadian energy sector.   Continued...