Since 1999, more than $200 billion has been invested in Alberta's oilsands. That's a lot of money in a relatively short period of time that fuelled a multi-year boom in Alberta and grew production from around a half million barrels per day in the late 1990s to a projected three million bpd in 2020. Investment hit a peak in 2012, but since has fallen off dramatically.
There are many concerns about the future of the oilsands as a result of the drastic fall of oil prices, considerable changes in the North American oil industry and environmental policies.
While the bitumen fields around Fort McMurray, Alta., are probably not going to be phased out by government, market forces mean the future could be good, bad or ugly over the next few decades.
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During the downturn over the last few years, research and development funding was cut at many oilsands companies as spending was slashed across the board. In part because of the carbon levy, spending on technology should rise again as oil prices gradually increase. New technology is key to the oilsand's future.
Companies are looking at new ways to lower costs and to reduce the environmental impact on land, water and air. In addition, there is some thought of moving away from building massive multi-billion-dollar oilsands facilities, in favour of smaller projects that are quicker to build and come with a smaller price tag.
The common opinion is that the oilsands won't see much growth beyond 2020, but depending on what new technologies are developed, that could change.
"There is a lot of talk about making the projects a lot smaller and bringing them online much faster, and partial upgrading and cleaning up the CO2 and all of that kind of stuff," said energy economist Peter Tertzakian with Calgary-based ARC Energy Research Institute. "The next 10 years can bring some upside surprises."
Just last week, MEG Energy announced an expansion project at its Christina Lake operations. It will use what it calls "enhanced modified steam and gas push" technology to add 20,000 bpd to its production. Cenovus Energy and Canadian Natural Resources Ltd. also announced oilsands expansions in the past two months.
That's the type of growth that experts expect in the future, instead of large multi-billion dollar greenfield projects, at least in the absence of a big breakthrough.
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As the massive expansion over the last decade slows, growth prospects have dampened. Companies are looking elsewhere for investments that can start earning a return more quickly and won't be as carbon intensive.
The problem with oilsands projects is that they take between five and seven years to receive proper permits, they need another five to seven years to build, and only then do they start producing oil and making money.
"The question of the last couple of years has been, 'Why would I invest in that when I can invest in Texas, Oklahoma, North Dakota and now even in other parts of Alberta, Northeast B.C. and Saskatchewan,'" said Tertzakian. "I can get a better return and I don't have to wait 15 years."
Both conventional oil and fracking in locations closer to pipelines are less expensive than getting oil from oilsands.
The growth profile for the oilsands is in question as it struggles to attract investment dollars. That's the reason why the industry has lowered its growth forecast for consecutive years.
The (real) ugly
In any industry, there is always a chance marginal players will be forced to close their doors, even as the main players remain strong. That's the situation that could play out around Fort McMurray.
There is a wide variability in the oilsands region in terms of costs and quality of resources, as some companies were late to the game and didn't have the best geology to access bitumen and get it to market. That's why there is range of operating costs and carbon intensity among projects.
If commodity prices slump again, environmental policies become more stringent and costs rise, some projects may prematurely close their doors. An early shutdown would be highly unusual as these massive projects are built to run for at least 40 or 50 years, but it could happen.
"If we project out one or two decades and some of these projects require increasing cost and capital expenditures, I'm sure the proponents will say, 'hmm, is it better just to pack it up or continue," said Tertzakian. "It's nothing I foresee in the next 10 years, but beyond that, who knows."
Big investment, long life
While some oilsands facilities have experienced temporary shutdowns, such as Nexen-CNOOC's Long Lake and JACOS's Hangingstone projects, those in the industry don't see any major facilities shutting down well before their targeted lifespan.
"Oilsands projects are very large initial investment and there is such scrutiny in the approval process to get those projects off the ground and built, a lot of those, even in today's environment, those operators in the oilsands are in it for the long haul," said Patrick McDonald, an oilsands manager with the Canadian Association of Petroleum Producers.
The three different scenarios are all plausible, with only the promise of technological breakthrough likely to lead to substantial growth for the oilsands. The most likely scenario, according to industry watchers, is production increases over the next three years, then only smaller expansions to existing facilities leading to more bitumen being taken out of the ground.
Even without significant innovative breakthroughs that lead to growth, the oilsands is expected to produce about three million barrels of oil a day by 2020.
"That's a very long-term base load resource for the world's energy needs over the course of the next few decades," said Tertzakian. "One of the attractive things about the oilsands is that it has a very long reserve life, it doesn't decline very quickly."