Oil sands top breakeven list

There’s a widely held misunderstanding that the easiest way to make money in the North American oil patch is to acquire property in the Alberta oil sands and start producing.

It’s assumed that a leaseholder can either strip the top layer and start mining, or, if the bitumen deposits are buried too deep for open pit operations then the answer lies in drilling wells, injecting steam and melting the bitumen.

But, of all the oil plays in North America, none come close to the breakeven point for new oil sands projects that combine mining and upgrading.

A report by Scotiabank that examined 50 plays said West Texas Intermediate crude prices of US$100 per barrel are needed for a new mining venture to generate a 9 percent after-tax return on investment.

Existing mining and upgrading operations can yield similar returns with oil prices at US$60-$65 per barrel, while Alberta in-situ oil sands projects can reach the breakeven threshold at WTI prices of US$63.50.

For other plays, Scotiabank set breakeven levels of: US$63.50 for Alberta conventional oil; US$57.90 for Lloydminster heavy oil; US$57.67 for the Shaunavon play in southwestern Saskatchewan; US$44.30 for southeastern Saskatchewan’s Bakken formation; US$69 for the U.S. Bakken; US$65.41 for the Niobrara; US$81 for the Permian basin; and US$63.57 for the Eagle Ford in Texas.

—Gary Park