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Quote:
Originally Posted by blender
Not arguing your point about demand now or in the future, but with such a hot demand, why is Canada's industry struggling so much right now?
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Well the government banned investment in new production for the last two years through a curtailment program designed to prevent the differential from expanding beyond $18 per barrel (cost of rail). Because of this loss of investment many jobs in the design and construction of new facilities disappeared.
The curtailment cuts to existing production meant the natural reservoir decline could occur drilling any new sustaining production wells was deferred. This caused people who involved in sustaining capital projects to lose their jobs
Since companies were still profitable during this periods they used cash reserves and cash flows to buy up competitors leaving the market merging companies leading to more job losses.
Given the change in perception of Canadian oil due to lack of takeaway capacity and large firms using the Oilsands as an easy way to score green points without hurting the balance sheets has made debt refinancing more difficult which has led to distressed assets and more take overs and more job losses.
While the above has been occurring a world wide pandemic surpressed oil demand in general and depressed price per barrel of oil. Evidence of demand for Canadian Heavy oil can be seen in the record low spreads during this time period.
However despite all of the above issues oil has consistently been above op cost per barrel, and op cost plus sustaining cap per barrel and for many complies op cost plus sis cap plus G+A.
Alberta is reasonably well positioned to produce the last barrel of oil.