August 22, 2008 / 4:10 PM / in 9 years

Buffett says has no "buy order" on oil sands firms

CALGARY, Alberta (Reuters) - Warren Buffett toured Canada’s oil sands with his friend Bill Gates this week to understand how the resources are developed, but the billionaire investor said on Friday he had no plan to buy into the sector.

<p>Billionaire financier and Berkshire Hathaway CEO Warren Buffett attends a television interview during the annual Berkshire Hathaway shareholders meeting in Omaha, Nebraska, May 3, 2008. REUTERS/Carlos Barria</p>

In an interview on CNBC television, Buffett said he and the Microsoft (MSFT.O) co-founder discussed their interest in the oil sands a few months ago, and agreed they would get a better education with a first-hand look than just reading about it.

The visit on Monday led some in the Canadian oil and investment industries to speculate that Buffett, chairman of conglomerate Berkshire Hathaway Inc (BRKa.N), and Gates could be readying to invest in the oil sands.

But Buffett said on Friday he has no “buy order” out, pushing down shares that had risen earlier in the week.

“No, no. I go to the movies, but I don’t buy movie companies. I mean, I‘m always interested in understanding the math of things and understanding as much as I can about all aspects of business,” he said on CNBC’s Squawk Box.

“And what I learn today may be useful to me two years from now. I mean, if I understand the tar sands today and oil prices change or whatever may happen, I’ve got that filed away and I can use it at some later date.”

Shares in oil sands producers jumped this week on the Toronto Stock Exchange, partly on investor wagers that Buffett and Gates were interested in the business.

But they fell sharply on Friday following Buffett’s remarks, and as crude prices tumbled by more than 5 percent.

Canadian Natural Resources Ltd (CNQ.TO) was off C$4.42 at C$85.05, Suncor Energy Inc (SU.TO) sank C$2.76 to C$59.02 and Canadian Oil Sands Trust COS_u.TO, the largest interest holder in the Syncrude Canada Ltd oil sands venture, was off C$1.47 at C$50.23.

The oil sands of northern Alberta represent the largest deposits of crude outside the Middle East and are seen as a major source of secure oil supplies for the United States.

With more than $100 billion targeting new projects, the oil industry estimates production from the oil sands will nearly triple to 2.8 million barrels a day by 2015.

However, the thick crude is much more costly to develop than conventional oil, and environmental groups have mounted major campaigns to spotlight the impact of oil sands development on air, land and water.

Buffett and Gates toured Canadian Natural’s C$9.3 billion ($8.9 billion) Horizon oil sands mining and synthetic crude processing operation, which is due to start production later this year.

It will be the fourth major oil sands mining venture, following those run by Syncrude, Suncor and Royal Dutch Shell Plc (RDSa.L).

The tycoons also visited an in situ oil sands project, in which steam is injected into the earth to loosen up the gooey crude, allowing it to be pumped to the surface in wells.

Buffett did not say which such operation he toured.

No matter how efficient oil sands operations are, oil prices -- and the ability to make long-term price forecasts -- will be the biggest factor in their profitability, he said.

“Because you could be the world’s greatest mining engineer, but if you were wrong about the price of oil in a big way, it would negate all that knowledge,” Buffett said.

“So I can tell you that ... if you had $120 oil from now till, you know, 50 years from now, that the tar sands would work out very well. But I don’t know the answer to that.”

$1=$1.05 Canadian

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