CERI mid 2014 Digest, Oil Sands Projects Overview

The CERI report came out in July and I thought a digest version of it may of use for those don’t want to go through all pages.

The report is in line with what we observe in oil sands community. Major greenfield projects are being postponed (Statoil Corner the latest one), and the focus is on revamp and debottlenecking, and of course on sustaining part. The SAGD part of CERI report points to those sustaining projects. SAGD still looks competitive against other unconventional plays in NA at $50/bbl field gate bitumen/SCO break event. However at WTI equivalent the figure jumps up to $85/bbl. This demonstrates the size of the gap in differential (assumed $18/bbl) and the transportation cost.

10% DF real and 12.5% nominal used for cashflow analysis.

See the full report here: CERI Study Oil Sands Supply Cost Update (2014-2048)

Highlights:

A loose comparison of field gate costs from CERI’s May 2013 update with this year’s supply costs indicates that, after adjusting for inflation, the supply cost for a SAGD producer has risen by 4.4 percent, 1.6 percent for a standalone mine and 5.9 percent for an integrated mining and upgrading project.

After adjusting for blending and transportation, the WTI equivalent supply costs at Cushing for SAGD projects is US$84.99/bbl, US$105.54 for a standalone mine; US$109.50 for an integrated mining and upgrading;, and US$41.44/bbl for a standalone upgrader. At WTI prices of US$100/bbl, the only project that would be economic is a SAGD in situ project, which is consistent with how the oil sands projects are currently being developed.

Key assumptions (more on sec.3):

  • 30,000 b/d and 100,000 b/d bitumen capacity used for SAGD and mining projects respectively.
  • Average CSOR of 2.8 used for SAGD projects.
  • AECO-C/henry Hub differential of US$1.25/Mmbtu, and a field premium of C$0.27/Gj used for cost of natural gas.
  • Flat light-Heavy differential at US$18.0/bbl
  • 10% DF real and 12.5% nominal used for cashflow calculation.
  • Federal and provincial income tax of 15 and 10 percent used respectively.
  • 1C$=US$0.98

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