CALGARY – Oilsands operators have little choice but to keep pumping despite the fact that they’re losing money on every barrel they produce at today’s crude prices, according to an industry analyst.
Martin King, with investment dealer FirstEnergy Capital, says once an oilsands project is up and running there are big technical issues with hitting the off switch.
King told an energy conference hosted by the Conference Board of Canada that oilsands projects are built to run for decades and can run for years losing money.
His remarks came on a day that prices for West Texas Intermediate crude, the U.S. benchmark, tumbled ever closer to the US$30-a-barrel mark, down more than 70 per cent decline from mid-2014 highs.
And that’s not even the price Canadian heavy oil producers fetch, which is discounted because it’s harder to refine and further from market.
The price of Western Canadian Select now is below US$17 a barrel.
The Conference Board expects WTI to average just US$40 a barrel this year because there’s “too much supply in the world,” said Glen Hodgson, the think-tank’s chief economist.
“Our grind back to even something around US$60 a barrel is going to take a number of years.”