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.

Alberta oilsands companies: Suncor buys Petro Canada

Why has Suncor bought Petro Canada?

Suncor has proposed to buy rival Petro Canada to form Alberta Oilsands largest oil company. The $15 billion US ($18 billion Canadian) stock purchase by Suncor of Petro Canada would be the second biggest purchase of an Alberta oilsands in the history of oilsands mergers and acquisitions in Alberta Canada. The purchase is said to help Suncor energy slash costs by reducing redundancy and become a more focused Alberta oilsands company. This is crucial in a period where we see oil prices at lows of $30 to $40 US per barrel and without any idea of how long US oil prices will remain at this level. Survival in the long term is what Suncor has been really good at and that is why they are Canada’s largest integrated Alberta oilsands company. This is an all-share deal and rates as the biggest Alberta oilsands takeover in history. The deal will help Suncor save over 1 billion in annual savings, a significant amount considering the limited access to financial resources in the current economic environment.

Is the Alberta Oil sands cheap?

The purchase of Petro Canada by Suncor begs the question of whether it is a good time to buy other Alberta oil sands companies. Are the Alberta oil sands cheap at this moment in time. Like Alberta real estate in Edmonton and Calgary which has seen a fall of over 30 percent in the last year, oil sands companies have likewise seen significant declines. The stock market, Toronto Stock exchange, Dow Jones, and S&P 500 are all significantly down over the last year and every stock that trades on the exchange has been brought down. It is more a lack of confidence in the financial markets as a result of the global financial crisis that is creating this current buying opportunity. But if Alberta oil sands is cheap right now, who can financially afford to buy it right now. There are very few big players in the Alberta oil sands industry who have also not been significantly hurt by the global financial crisis. Surviving the short term is a key priority for all Alberta oil sands companies despite any cheap buys. We may see other global companies from the Middle East or Asia (China in particular) make a serious offer for cheap Alberta oil sands companies. The Suncor offer for Petro Canada does seem to indicate that it is indeed a time for cheap Alberta oil sands purchases. Suncor, however, will also see significant savings in the purchase due to cost reductions which is an additional incentive for the current purchase.

Are there other Alberta oilsands companies going to be purchased soon?

What other Alberta oilsands companies are going to be snapped up in the next 12 months. It is only a matter of time before the buying spree continues. With the firming of US oil prices at $50 US per barrel, there seems to be more confidence in the medium term for Alberta oilsands companies. The stock market has recovered significantly in the beginning of April 2009 and this points to a growing consumer confidence. Alberta oilsands companies that may be bought first will be the bargain shoppers who are looking for companies with great pieces of land in the Athabasca region but short on financial capital. Companies such as BA Energy will be one of the targets of these Alberta oilsands investors who are eyeing the potential of owning prime Alberta oilsands real estate. The long term trends of the oil industry are still rosy as the demand for oil will continue to be much higher than the annual supply. This and the inability to find alternative cheap sources of energy is the reason that conventional oil will continue to rule the world.

Why Alberta oilsands productions have halted in 2009

Alberta oilsands projects have halted in 2009

The global financial crisis and the drop in oil prices to below $40 US per barrel has served a double whammy to the Alberta oil sands companies. Not only is the price of US $40 oil not as profitable for the Alberta oilsands companies but the global financial crisis is also reducing the available money for these companies to hire more labour and produce more oil. So falling commodity prices and weak credit markets make for a strong reason why Alberta oilsands projects have halted in 2009. The effects of the global financial crisis can also be seen in weaker demand for oil as more and more people are saving money in uncertain times. Less vacations means less Alberta oilsands development as well. The big Alberta oilsands companies such as Suncor, BA Energy and Husky energy will all see very weak 4th quarter 2008 earnings and this will dictate their strategy for 2009. We have already seen more than 10 billion of oilsands production halted and more announcements are expected to come.

Alberta oilsands companies cutting dividends

Alberta oilsands companies such as Suncor have cut their regular dividend payment to their shareholders. Suncor, one of the large Alberta oilsands companies, pays quarterly dividends to its shareholders. Investors have relied on the steady and safe return provided by companies such as Suncor who pay their dividends on a regular basis. This has been the main reason why people invest in oil sands trust which is mandated by their shareholder agreement to pay a specified amount of its income as dividends or automatic reinvestment shares. However as hard times have hit the global financial markets and the banks have stopped lending and cut credit, Alberta oilsands companies such as Suncor have had to take measures to conserve their cash. Conservative measures taken now rather than when the cash reserves run out is what Alberta oilsand companies are planning on as they try to survive the financial crisis. Will cutting dividends in the short term help these Alberta oilsands companies? Yes and No maybe the answer because if the financial crisis is short then we can expect the cash reserves to be improved soon. But if the financial crisis lasts for a few years then we can expect some bankruptcies to occur as cash strapped companies must close their doors.

Turn around time for Alberta oilsands projects

When will the turn around be for the Alberta oilsands projects. One year, two years or more is the question investors are demanding when they plan their investments in the Alberta oilsands. While the big Alberta oilsands projects have been postponed and not cancelled, the smaller Alberta oilsands projects have been cancelled. The big companies such as Suncor can wait out a slow period of growth by holding off for a year or more. In times of slow growth or negative growth we can expect some consolidation in the industry. The turn around time for the Alberta oilsands projects is expected to be 24 months. This coincides with the end of 2010 and when the global financial crisis is expected to improve and credit will once again be normal. We can expect Alberta oilsands projects to be announced again before the credit fully turns around. Maybe in early 2010 we will expect the activity in Alberta oilsands to be robust and more projects announced to be started.

Alberta Oil is cheap supply for US Obama

Ed Stelmach says US will need Alberta Oil

Alberta oilsands produces a reliable and secure oil source for the US. Ed Stelmach sent a clear message to the Obama administration when he said US will need Alberta oil in the future. It is important for the US to recognize that Canada’s Alberta rich oil sands is a secure and cheap source of oil for the growing US Demand. Fossil fuels including the oilsands will provide more than 80% of the supply needed to satisfy world demand for oil. It is in the best interest for the US to work closely with Canada in implementing a viable solution to develop the oilsands responsibly. Expel the myths and produce the facts of Alberta oil and let the world know what the Alberta oilsands companies can do to protect the environment. In 2008, the Alberta Government created a $2 billion dollar fund to promote solutions to solving the dirty oil problem. This and other solutions from the oilsands’ companies themselves will serve to promote this abundant resource for the growing demand for oil consumption.

Obama concerned about Alberta Dirty Oil

Obama has an aggressive plan to combat climate change. He says that we can not punish the future by exploiting the present and we will not tolerate the increase in green house gas emissions while he is President. This is a direct blow to Alberta oilsands companies and the growing environmental concern about ‘dirty oil’. Alberta’s dirty oil image is a picture of an environmental disaster waiting to happen. We are shown images of Northern Alberta’s oilsands production in Fort McMurray, the Athabasca region, and how the destruction and carnage of the environment is occurring without concern. Environmentalist are adamant that dirty oil in Alberta cannot continue and they will work harder in showing the world the truth that is happening to this ecosystem. Obama further stated that his presidency will reduce the US’s dependence on ‘dirty oil’ for good. Ed Stelmach of the Alberta government on the other hand has been working vigorously in fighting the environmentalist by dispelling the myths behind their stories.

Dirty Alberta Oil: Myths and Facts

Myths about Alberta oilsands are abundant. But what are the true facts of what the Alberta oilsands is doing to the environment. With a $2 billion dollar investment by the Alberta Government in researching solutions to develop the oilsands more cautiously, we are sure to hear a lot of buzz about the oilsands in the near future. One of the myths about the oilsands is the amount of impact that oilsands has on the environment. A study was done comparing the emissions that currently are produced by coal production, a large polluter in the US and China, versus the oilsands. When compared with this polluter, the oilsands represents less than 1 percent of the emissions being emitted by coal production. Another myth follows about the oilsands environmental impact due to tarsands pools created from extracting the oil and leaving the toxic remains behind. Of course the toxic remains have always existed in the area even without removing the oil. The environmentalist are concerned that the process of extracting the oilsands will create a bigger impact than if no production was done. While this may be true of only some rare situations, the truth is that the tarsands production is very careful in leaving behind tarsands pools in a way that will not be worse than the original case. Of course the results are hard to prove by both sides given the short amount of time that has passed since the production of the oilsands.

Alberta royalty cuts: will it help the oil companies?

Why is Alberta cutting it’s royalties?

The Alberta Government just announced their policy change in March 2009 for the Alberta Oil sands royalty revenues. The Alberta government has decided to give Alberta oil sands companies a break in 2009 due to the financial crisis and drop their oilsands royalties significantly for any new activity that will be done in 2009. What this means is that any Alberta oilsands companies willing to invest in their existing oilsands projects and thus create new jobs in Alberta will be able to benefit from paying less royalty to the Alberta government for the oil that they produce. There is of course a cap on the amount of the cut and it only applies to a certain amount of oil produced as well as the time period. Time is of the essence in the Alberta royalties cuts and Oilsands companies need to move fast in order to benefit from this revenue boosting cut. The main reasons for the royalty reduction in Alberta is the lower revenue that is expected due to the postponement of many major oilsands projects and due to the climbing unemployment rate in the province. The Alberta government is losing revenue anyways and the reduction in royalty split may actually increase its share in a shrinking royalty pie in 2009 and 2010. The other reason is that oil prices that have hit historic highs of $140 US per barrel have fallen to barely profitable levels of $35 US per barrel. At these low US dollar per barrel oil prices the Alberta oilsands companies have postponed any further production to protect their future revenues.

Who will benefit from the Alberta royalties cuts?

So who will really benefit from the Alberta royalties cuts anyways? The Alberta oilsands companies consists of a few major players and lots of smaller companies. The fragmented nature of the oilsands companies is the reason why it is so hard to control the revenue that the Alberta government hopes to achieve. The global financial crisis has caused a reduction in the available capital to all Alberta oilsands companies both big and small. This is the real reason behind the many postponements of major oilsands projects and why we may continue to see very little oilsands activities despite the Alberta royalties cut. The stimulus for the cuts is giving the Alberta oilsands companies more future revenue but as you can see this misses the point of why they have reduced their development in the first place. This is especially true of the smaller oilsands companies in Alberta as they do not have the financial reserves that the bigger players such as Suncor has. In the current global financial crisis we can expect the big players such as Suncor, Husky Energy, or BA Energy benefit from the Royalties cuts the most. The smaller players will have to sit on the sidelines waiting for the banks to start lending again before taking part in any revenue gains as a result of Alberta royalties cuts.

Alberta oil company activity in 2009 and beyond

What will happen in 2009 for Alberta oilsands companies and the industry? This is a question mark for everyone including this writer of course but we can definitely put out our opinions. One of the main factors for any growth in the Alberta oilsands development in 2009 is the ability of the global financial crisis to stabilize. This is by far the most important factor in determining whether we will see an increase in Alberta oilsands companies investments. With an increase in lending activity we should start to see the large Alberta oilsands companies start to perhaps consolidate by buying smaller oilsands firms. This consolidation will happen at good prices not seen for some time as the smaller oilsands companies values have decreased dramatically with the fall in US oil prices to $35 per barrel. The second important factor is the US price per barrel of oil and what price this will stabilize at. It is important for US oil prices to maintain a level of $50 or more. This level of US price of $50 will allow for the profitable development of new projects without over production causing abnormally high costs. The US price per barrel of oil should not be more than $100 or else this will have an adverse affect on the industry.

Alberta Oil Sands Companies: Suncor Energy

Suncor develops Alberta Oilsands in the Athabasca Region

Suncor Energy Inc. is an integrated energy company with large holdings in the Alberta Athabasca region. The company was founded in 1967 and currently employs more than 6,500 employees. Being an integrated energy company, Suncor has large holdings in the Alberta Oilsands Athabasca region, explores, produces and develops natural gas, has downstream operations in Ontario and Colorado that market the company’s refined products. In addition to it’s oil and natural gas, Suncor also has investments in renewable energy including wind power farms and Suncor’s ethanol facility, a known biofuel, in Ontario. Though its main focus is on the development of the Alberta Oilsands and is one of the first Alberta Oilsands companies to locate in the Athabasca region.

Suncor and Alberta Oilsands production

Suncor Energy Inc. main focus is Alberta Oilsands production. The Alberta Oilsands is an oil rich area that has more commercially viable oil than anywhere in the world and the reserves are only getting larger with improvements in technology. Suncor has been developing its Alberta Oilsands since 1967 and continues to be one of the biggest Alberta Oil sands companies in the area. By recovering oil, known as bitumen, from the oil sands and refining it to produce products that include feedstock and diesel fuel, Suncor provides an economically viable product that is in high demand around the world. The two methods that Suncor uses to recover oil from the Alberta oil sands is surface mining and in-situ (similar to conventional oilwell production). Through advances in Alberta oilsands technology and computers and engineering techniques, the current proven reserves in Canada’s Alberta Athabasca region is only second to Saudi Arabia. However, our potential reserves given an improvement in the technology in the future are far in excess of anywhere else in the world.

Suncor Energy Inc.on the NYSE and TSX: SU

Trading on the Toronto Stock Exchange, TSX, and the New York Stock Exchange, NYSE, under the symbol SU, Suncor is a global energy company with access to private capital. Suncor has a dividend reinvestment option that allows current shareholders to easily and cost effectively reinvest their regular quarterly dividends into more shares of Suncor. The stock price of Suncor hit an all time high in 2008 of $73. With the current fall in oil prices, Suncor has fallen back to its 2004 and 2005 price range of $20 to $30 per share. The value of Suncor is highly dependent on the price of oil and the world demand for oil products. While the oil prices remain in the range of $30 - $40, the price of Suncor and other Alberta oil sands companies including BA Energy, Husky Energy, and Petro Canada will all be affected by the weakness in the commodity price. When the price of oil peaked at $140 per barrel we saw the high reach $73 per share so there is a large range of share prices in the current market. With global demand expected to continue to be robust and after the financial crisis is passed, we expect to see another jump in the price per barrel of oil. While alternative energy such as windpower, biofuel, and solar panel are still in its infancy, we can also continue to expect the reliable consumption of oil to continue.

Alberta Oilsands Companies Feature: Husky Energy

Husky Energy and the Alberta Oilsands

Husky Energy is an integrated energy and energy related company. Incorporated in Calgary, Alberta, Husky Energy has operations all across Canada. Vertically integrated oil company with a listing on the TSX: HSE, Husky Energy is a developer, an integrator, and a retail seller of oil. Husky Energy is a large player in the Alberta Oilsands in Northern Alberta. Husky energy has a 100 percent interest in oil sands leases east of Kearl Lake, about 60 kilometers northeast of Ft. McMurray. The company’s website is www.huskyenergy.com.

BP Energy and Husky Energy

In December 2007, BP Energy acquired half share in Sunrise field in Northern Alberta, operated by Husky Energy. The deal will have Husky acquire a half share of BP’s Toledo oil refinery in Ohio US. This joint venture will form an integrated North American oil sands business. A 50/50 joint venture will be independently operated and developed. BP’s purchase of Husky’s Sunrise project gives BP a bigger stake in the Alberta oil sands market. The Sunrise oil sands field is expected to have its first production of bitumen in 2010 with up to 200,000 barrels of oil per day (bpd) within 10 years. The total production cycles is expected to last 40 years. Husky’s Sunrise projects is located in the Athabasca oil sands region in the north-eastern part of Alberta. The joint venture gives Husky an integrated oil sands venture with upstream and downstream businesses. BP is one of the world’s largest oil and gas companies with operations in 100 countries over six continents.

Husky Energy and Husky Market and Mohawk Gas

Husky Energy operates retail gas stations and a retail restaurant. Its own brand of gas stations, Husky Gas has been around for more than a decade in the Canadian market. Husky Energy has teamed up with CAA, the Canadian Automobile Association, to collect CAA points on every fill up of gas. The other retail outlets at certain Husky gas stations include the convenience store Husky Market and the restaurant Husky House. Very well known in the Western Canadian Provinces, the Husky Energy brand is becoming a bigger player in the retail space. Husky Energy has also recently purchased Mohawk Gas and added their brand to its own. Consumers who visit a Mohawk Gas are now filling up their cars with a Husky Energy product and can collect CAA points along with their purchases. Currently Husky has more than 500 retail locations which make it the third largest retail oil and gas company in Canada.

Recent News with Husky Energy

Husky Energy follows other Alberta Oilsands companies in slowing its production in the Alberta oilsands for 2009. Husky Energy has decreased its investment from $300 million in 2008 to $65 million for 2009. While this is a strategic move in the current low US oil price environment, Husky Energy has not commented on whether it is pulling out of the Alberta oilsands market. Husky did say they are continuing with the Sunrise oil sands project, located about 60 kms northeast of Ft. McMurray, Alberta. BP and Husky expect costs to continue come down in the Alberta Oilsands. The Sunrise project is at the pre-engineering stage where its optimal design is being assessed. Other companies that have announced slowdowns in 2009 include Royal Dutch Shell PLC, Statoil ASA, ConocoPhillips, Petro-Canada and Suncor Energy Inc.

US $40 Oil per barrel and the Alberta Oilsands

US $40 Oil price per barrel – what does this mean for Alberta Oilsands

When US $40 oil price per barrel hits the world economy it means that there are more uncertain times to come for the Alberta Oilsands. A gauge for the strength of the US economy, the $40 per barrel price of oil in the US is signalling to the world that we are still in the midst of uncertainty. The January price per barrel of oil was in the mid $30 US and our current level is only slightly better. To the Alberta Oilsands that is still not a strong enough signal for players to make bold investments in new projects. I think what the big players are looking for is a stable US oil price at $50 per barrel or perhaps $60 per barrel. Not $40 per barrel of oil because at this price all projects related to the Alberta Oilsands is just marginally profitable. With an overhanging financial crisis, marginal projects are better put off than to be started. The direction of the market will tell Alberta Oilsands companies what they should do.

US Recession and Alberta Oilsands

The price of $40 US oil per barrel has been watched closely along with the US stock markets. The ups and downs of the Dow Jones Industrial Average has been a common pastime with viewers around the world. Especially with the slide of the DJIA mirroring the slide in the $40 US oil price per barrel and the fortunes of the Alberta oilsands. What is happening in the US with the continuous layoffs in the thousands from company’s such as Lowe’s, Home Depot, Walmart, and J.C. Penney just to name a few of the bell weather companies. The price of oil in the US has fallen to record lows and the price of the stock market is also at record lows. Is there a link between the price of oil and the US stock market? Will the US Recession lead to a slowdown in the production in the Alberta Oilsands as well. While the questions remain unanswered, the big players are on a wait-and-see approach to investing in the Alberta Oilsands. We will wait and see what happens before we take a bigger position in our Alberta Oilsands investments.

OPEC supply and Alberta Oilsands

OPEC or the consortium of Middle Eastern oil companies which stands for Oil and Petroleum Exporting Countries has long been the major player in deciding oil prices. A signal from OPEC regarding their supply usually signals to the world the direction of what oil prices should go. However recently OPEC has cut supply signalling the oil price per barrel to rise but the price has not done so. This cut is confirmed by the Energy Information Agency which reported a drop in inventories of US Crude. What can Alberta Oilsands companies do when even OPEC has no power to control the price of oil. Alberta Oilsands is the second largest supply of oil after Saudi Arabia, a member of OPEC, and has the worlds largest proven reserves even greater than the middle east. However Alberta Oilsands reserves are only proven if the price of oil remains above US $40 per barrel as this is the lower limit of the cost it would require to convert the oilsands to viable oil production. OPEC’s cut in supply should affect world oil prices in a more direct manner but in today’s uncertain economic environment, consumer confidence is a bigger key in unravelling the price of oil.

Low $30 Oil and the effects on the Alberta Oilsands

Why is oil at US $30 and what effects will it have on Alberta Oilsands

It is Feb. 12 and US oil prices have settled at US $33.98 a barrel. What has happened to the price of oil and can Alberta oilsands companies still remain profitable at this level? The price of oil fell 5.5% to settle at its lowest point in recent memory. We seen the US price of oil fall from $140 US a barrel in less than 6 months to $33 US a barrel. Can the Alberta oilsands companies survive this level of low oil prices? It has been the uncertainty of the future price of oil that concerns Alberta oilsands companies and not the current price levels we see in the market. It is in this unstable financial market that we the halt of further development of any new Alberta oil sands companies’ projects and a stand still in development. While many companies including large oilsands companies Syncrude Oil continue to be optimistic of the future, many smaller oilsands companies have had to file bankruptcy. What is a sustainable level of US oil prices a barrel and will there be a mass file for bankruptcy soon for this industry?

Large inventory of Oil means continued low US oil price per barrel

It is a straight supply and demand equation for why oil prices are low right now. The financial crisis can be blamed for this but so can the rapid rise in US Oil prices per barrel and the frenzied speculation we have seen for investing in anything related to the Alberta oil sands. Currently we have a glut in demand leading to a stockpiling and buildup of inventory in the US and the world. We frankly have record levels of inventory of oil meaning that the US oil price per barrel remains low. Until this glut is consumed and demand for oil resumes, we will continue to experience record low levels for US oil prices. It is hard to imagine a situation like this since we have been so accustomed to the opposite. The demand for oil has been so robust leading to the quick and rapid development of the Alberta Oilsands. The Alberta oil sands represents a significant source of Oil and is only second to Saudi Arabia. However, with the current glut and oversupply we are seeing the slowdown of massive proportions. In the US we expect to continue to see a glut in demand as unemployment data continues to be negative and the forecast the same for the next few months. More and more people will choose to conserve and thus the US oil price per barrel will be at $30 or even lower to come.

Can global demand for oil shrink in 2009

Aside from the question of a glut of demand for oil in the US is the bigger question of the world demand. What is going to be the demand for Oil from the world in 2009 and 2010? There are many reports from well known International Agencies reporting that the demand for oil in the world will shrink to levels in the early 80’s. This means that we may see a low US oil price per barrel for some time to come. What will the global demand for oil mean to Alberta oilsands developments? It is a hold and see approach for 2009 and possibly the first quarter of 2010 as major Alberta oilsands players are reacting to the numbers of global demand. If the demand for oil continues to shrink in 2009 then we will see a low level of economic development in Northern Alberta, Athabasca regions where development has been brisk for the last 5 years. While no one can see the future, it is the job of companies such as Shell, Syncrude, and Imperial Oil to forecast the demand and thus the development schedule of oilsands development. It is these large Alberta oilsands companies that can change their production and development schedule to closely match global demand.

Slower pace of development good for Alberta Oilsands

Alberta Oilsands will benefit from the slower pace

The slow down of the development in the Alberta Oilsands and Northern Alberta region will actually have a positive long term affect on the environment. The past few years have been a frenetic pace for Alberta oil sands companies and oilsands developers to quickly develop and buy up more land in Northern Alberta. The higher price of oil caused a euphoria in investment capital being poured into Alberta oilsands companies without any consequence to the environmental impact. The recent slowdown in development will actually benefit Fort McMurray and the Athabasca Region as the region gets some time and breathing room. Some much needed time to take a look at what can be done to develop the valuable resources that the Alberta oilsands offers and to positively impact the communities that they operate in. Yes, the slower pace of development is actually a blessing in disguise and will give Alberta Oilsands companies time to develop a long term strategic plan that will take into account the communities and the environment in relation to the profit potential.

Developing an Environmental plan for the Alberta Oilsands

Many environmentalists and governmental agencies have criticized the Alberta Oilsands companies in their lack of a solid plan for the development of the Alberta oil sands region. This lack of a plan will not only have long term negative consequences to the environment but also affect all the surrounding people living in the communities of Northern Alberta and the Athabasca region and Fort McMurray. A lack of a solid plan is a direct correlation to a lack of responsibility and accountability for the environment that these Alberta Oilsands companies have. It is unacceptable to not have a viable environmental plan for the Alberta Oilsands and many environmentalists around the world are lobbying their governments to take actions to prevent any further damage to the Northern Alberta and Athabasca regions. It is important to immediately address the long term consequences of developing the Alberta tarsands and making sure that the environmental impact is minimized. Having a solid environmental plan for the Alberta oil sands will be a first step in reaching this shared goal and the Alberta Government is also in agreement with this position.

Alberta Oilsands and the Aboriginal Communities

Many Aboriginal Communities, including the Metis Settlement, are affected by the development activities of the Alberta Oilsands. The concerns for health and the destruction of their lands is a primary objective that the Aboriginal communities including Chief Allan Adam of the Athabasca Chipewyan First Nation is striving so hard to achieve. As so many Aboriginal Communities will be affected by the Alberta oil sands companies, it is vital that the rights and concerns of these people be dealt with immediately. We cannot build first and make a plan later for the environmental impact. This is not acceptable and will be a major obstacle for the further rapid development of many Alberta oilsands projects. On the other hand, there has been some good news regarding the environmental plan for the Alberta oilsands and the Aboriginal Communities. There has been a lot of positive development towards drafting of solid plans to protect the environment from the rapid development happening in the Athabasca region. However, as with most talk, people want to see action and it is this action that will help the Aboriginal Communities.

Alberta Oilsands and the Cap-and-Trade System

What is Cap –and-Trade System and its impact on the Alberta Oilsands Companies

Cap-and-Trade system is a name given to an environmental initiative to reduce greenhouse gases. Essentially, all industries would be given limits on the amount of greenhouse gases that it could release. The Alberta Oilsands companies in particular would be monitored closely under the Cap-and-Trade system. It is well known, at least publicly believed, that the Alberta Oil Sands companies are big emitters of greenhouse gases. Al gore has shown in his video that greenhouse gases pose a significant threat to the planet and unless we are aggressive in reducing our levels we will continue to face harsher environmental impacts. The Cap-and-trade system would fine Alberta Oilsands companies who exceed the caps placed on them by imposing heavy fines. These fees would actually go from the Alberta Oilsands companies who exceeded their limits to those under the limits. In effect this would benefit the companies who are good to the environment and reward them for reducing greenhouse gases.

US Barack Obama and the Cap-and-Trade System

In the US, President Barrack Obama has set environmental goals to lower greenhouse gases to 1990 levels by 2020. The Cap-and-Trade system will be a tool used to achieve this goal. In Canada, Prime Minister Harper has set a similar goal of 3 percent less than 1990 levels by 2020. The Conservative Government and the Obama administration has set very similar goals in using the Cap-and-Trade system to and other tools to aggressively reduce the impact from green house gases. The Conservative Government commented on the timing of Canada in implementing this strategy now that the Bush administration is gone and US Barack Obama is now the President. It would have been wrong timing to have released Canada’s plans if the US was also not in favour of the Cap-and-Trade system or at least supporting our mutual goals of reducing greenhouse gas emissions.

Kyoto Accord is now the Cap-and-Trade System

The Kyoto Accord, an International Treaty to reduce greenhouse gases, was previously agreed upon by the Liberal Government. The Kyoto Accord differs from the Cap-and-Trade system and was eliminated under the Harper government. Though many countries still adopt the Kyoto Accord as their goal to reduce greenhouse gases, both the US and Canada have went their own ways and are currently looking at the Cap-and-Trade system to achieve the similar goal. Under the Kyoto Accord, each country would reduce greenhouse gases and their neighbours would be expected to do a similar reduction. By reducing greenhouse gases, a country would earn pollution credits. It is possible for the neighbouring country to buy pollution credits from their neighbours who are doing more to reduce greenhouse gases. In the end, the country that is emitting less greenhouse gases will be rewarded and the world will benefit from reduced emissions under the Kyoto Accord. However, as you can predict, all neighbouring countries need to buy into the system for it to work effectively. The Cap-and-Trade system will also have a similar trading mechanism but it is expected that both the US and Canada to play by the rules and reduce greenhouse gases.