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(Corrects cash flow decrease to $23 billion from $21 billion in headline, first and fourth paragraphs after Wood Mackenzie revised figures)
CALGARY, Alberta, Feb 24 (Reuters) - Oil sands cash flows will fall by $23 billion in the next two years, energy consultancy Wood Mackenzie said in a report on Tuesday, as low global petroleum prices make it less economical to extract bitumen from northern Alberta.
Canada's oil sands hold the world's third-largest proven crude reserves after Saudi Arabia and Venezuela, but operating costs are among the highest globally, according to Wood Mackenzie principal analyst Callan McMahon.
Current operating costs reach $37 per barrel for thermal projects, in which steam is pumped underground to liquefy tarry bitumen so it can flow, and $40 per barrel for mining projects.
With benchmark U.S. crude trading around $50 a barrel, down from more than $100 in June, McMahon said the oil sands region's cash flows would drop by $23 billion in 2015 and 2016 combined.
Producers including Suncor Energy Inc, Cenovus Energy Inc and MEG Energy have slashed 2015 capital expenditures in response to the oil price slump.
Wood Mackenzie estimates industry spending will drop by $1.5 billion over the next two years, down 4 percent from its fourth-quarter 2014 assumptions.
Even so, the consultancy forecasts only limited effects on production until 2017.
McMahon said production was unlikely to be shut in even if projects temporarily operate at a loss, while new ones scheduled to start up this year will go ahead because the investment has already been made.
"With the costs sunk, projects totalling 458,000 bpd of bitumen are set to start production in 2015-2016," McMahon said.
Wood Mackenzie previously forecast peak bitumen production of 4 million barrels per day from the oil sands in 2020 but has now pushed that back to 2024.
On Monday, Royal Dutch Shell Plc said it was shelving plans to build the 200,000-bpd Pierre River oil sands mine in northern Alberta, the largest such project to be deferred.
Total SA and Statoil ASA also recently postponed big oil sands projects due to weak prices. (Reporting by Nia Williams; Editing by Lisa Von Ahn)