CALGARY, Alberta (Reuters) - As global oil majors pull out of Canada’s oil sands, domestic companies are buying up assets and betting technology and economies of scale will enable them to turn a profit despite low crude prices.
Global energy majors have sold off more than $22.5 billion worth of Canadian oil sands assets so far this year, concerned about depressed oil prices, high production costs and carbon emissions and limited pipeline access to market.
Three of Canada’s biggest oil and gas companies reported first-quarter earnings and held annual general meetings this week, in which they talked up opportunities in the region despite global firms pulling back.
“We are transforming our company at a pivotal time in the industry and at the beginning of a technological renaissance,” Cenovus Energy Inc Chief Executive Officer Brian Ferguson told investors on Wednesday.
Cenovus last month announced a C$17.7 billion ($12.98 billion) deal to buy ConocoPhillips assets, doubling the size of the Canadian company. The market baulked at the ambitious acquisition and Cenovus stock lost a fifth of its value, but Ferguson insists the logic behind the deal is sound.
He predicts 2016 to 2020 will be period in which rapid technology development in areas including drilling, solvent-assisted bitumen extraction and automation will result in massive cost savings.
Suncor Energy Inc CEO Steve Williams said the sector consolidation was very positive for the industry and Canada.
“The oil sands business needs focused operators with strong balance sheets and deep expertise,” Williams said on an earnings call. “We expect the transition to more concentrated oil sands leaders to enable regional synergies and technology development that will drive the sector forward and ensure its global competitiveness for decades to come.”
Suncor, Canada’s largest energy company, bought a majority-share in the Syncrude mining and upgrading project last year.
The facility cut production after a fire in March but Suncor’s main oil sands plant nearby has helped manage Syncrude’s bitumen inventories during the outage, a move that Williams said was a good example of how to leverage expanded infrastructure.
Imperial Oil Ltd, majority-owned by Exxon Mobil Corp, has so far held back from buying up any oil sands assets, but CEO Rich Kruger said Canada’s vast bitumen reserves were an incredible resource with improving economic and environmental competitiveness.
“Our industry has shown we have an ability to make things better and better over time, so don’t bet against the Canadian oil sands,” he said.
Editing by Lisa Shumaker