Canadian Tar Sands Oil Selling For $19/Bl; Projected Production Costs For New Project $85/Bl; Oops.

At current prices, Canadian tar sands oil producers are losing money on every barrel of oil they dig out. Despite signs earlier this year the industry would “turn profitable in 2018,” a much more likely scenario at this point is a fourth straight year of losses. Producers are forced to keep cranking out product and selling it at a loss to cover the massive costs required to start one of these sprawling unconventional oil operations, a point made painfully clear when Alberta wildfires in 2016 forced some tar sands operators to shut down.

“I do think they'll start up quickly once the danger from the fire is gone because there is a lot of motivation to do that,” Jackie Forrest, an energy economist for Arc Financial Corp, told The Globe and Mail. “They have a lot of fixed costs so they're going to be motivated to get some revenue to pay for those costs that aren't going away.” In the face of such challenging economics, what are Canadian tar sands producers doing? Tapping more oil than ever.

EDIT

American refineries certainly enjoy buying Canadian crude at such low prices. How low are the prices? As the Financial Post reported in mid-October, Western Canadian Select (WCS) was $19 a barrel — approximately $50 a barrel cheaper than a barrel of the American oil standard known as Western Texas Intermediate (WTI). Without a competing market in sight, American buyers likely will continue receiving huge discounts on Canadian oil. As Sandy Fielden, director of oil and products research at Morningstar, told Reuters in 2016: “If Canada can’t get their oil to another market besides the U.S. [market], you’ll always be a price taker, not a price maker.”

Even under these economic conditions, one company, Teck Resources, is proposing to build a new tar sands mining operation. Projections estimate the cost to produce a barrel of oil at this operation will be around $85 a barrel. That's quite the mismatch with what a barrel of Canadian crude oil is fetching these days, and doesn't bode well for a sustainable business model.

EDIT

https://www.desmogblog.com/2018/10/25/canadian-tar-sands-oil-financial-losses#disqus_thread