Alberta Oilsands Companies: Imperial Oil to invest $8 Billion

Imperial Oil to invest $8 billion in Kearl Project

An amazing story for Alberta Oilsands companies just released. Imperial Oil, owned by US Parent Exxon Mobil and known for it’s retail chains Esso has announced that they will invest $8 billion in the first phase of the Kearl Project. The Kearl Project by Imperial Oil is located north of Fort McMurray and part of the Athabasca Region known for its vast reserves of oilsands. This is an amazing piece of news for the Alberta Oilsands industry as they have come to a standstill in the last 6 months when US per barrel of oil plummeted to $30. With the current price of US per barrel of oil at $60 and the availability of cheaper supply costs, it was an ideal time for Imperial Oil to continue with their project. The Kearl Project is expected to produce 110,000 barrels of oil per day starting in 2012 and this is just the first phase of this project. The entire project will last for over 50 years and is considered one of the best undeveloped Alberta oilsands resources available in the Athabasca region. The cost estimate of $8 billion is inline with Imperial Oil’s previous estimate 5 years ago and it was a matter of waiting for the right timing to announce and begin this project. With the availability of labour now that so many other Alberta Oilsands projects have halted production, Imperial Oil was able to secure more reasonable labour and supply costs for their Kearl Project. All in all this was a win win for the company and for the Alberta Oilsands industry.

$60 US per barrel of Oil is profitable for Alberta Oilsands

Now that $60 US per barrel of Oil is a reality in May 2009 where do we go from here. The Alberta Oilsands has been dependant on US per barrel of oil reaching at least the $60 price and stabilizing at this level. The recent announcement by Imperial Oil with a $8 billion investment in their Kearl Project north of Fort McMurray really tells the world that oilsands is here to stay. Not only will $60 US per barrel of oil stabilize but industry analysts all believe that the price will rise from this level and probably be more at the $80 price per barrel. Of course it is anyone’s guess on what will happen but the big companies in the Alberta Oilsands are starting to make their large investments now the $60 US per barrel of oil is here. Who will be the next major Alberta Oilsands company to make an announcement that they will continue with their project? Will it be Shell or Husky Energy or even Suncor. The availability of cheaper labour and supply costs will definitely make these large projects more viable even if oil falls back to $40 US per barrel. A more planned Alberta oilsands investment environment will benefit labour and companies as stability is a key to success.

US price per barrel of Oil is continuing to rise

Alberta Oilsands will definitely benefit from a rising US price per barrel over $60. Perhaps a stable $80 US per barrel of oil for the next five years will see a good steady growth of projects in the Alberta Oilsands areas of Fort McMurray and Edmonton or Calgary. The availability of financing will also play a key role in the further development of the Alberta Oilsands and this will determine the pace of new projects. With a higher US per barrel of Oil at $60 or more the current players in the market are more able to finance their larger projects with the improved cashflow projections. World demand for oil from Asia and the US will continue to make US price per barrel of oil swell and especially in the summer months when demand for oil is high. Though with the recent rise in oil to $140 and the double whammy of the financial crisis, consumers around the world will be more cautious about their oil consumption habits. This is actually a good thing as it will stabilize demand and keep US per barrel of oil at a more moderate level. Hopefully the availability of other viable alternatives to US Oil will make the price per barrel also more stable.