Buffett bides his time on oil sands
Gary Park For Petroleum News
Warren Buffett didn’t scale the money mountain by making ill-considered, spur-of-the-moment investment decisions and he’s not about to change that approach by sinking any of his wealth into the Alberta oil sands.
A one-day flying visit to northern Alberta, with his pal Bill Gates in tow, won’t see the so-called Oracle of Omaha loosen his purse strings and dump some of Berkshire Hathaway’s US$31.6 billion in loose cash into the oil sands.
Buffett told CNBC’s Squawk Box show that he has yet to put out any “buy orders” on oil sands shares.
“No, no. I go to the movies, but I don’t buy movie companies,” Buffett said. “I mean, I’m always interested in understanding the math of things and understanding as much as I can about all aspects of business.
“And what I learn today may be useful to me two years from now. I mean, if I understand the tar sands today and oil prices change or whatever may happen, I’ve got that filed away and I can use it at some later date.”
Visit to Horizon mine Buffett and Gates spent time at Canadian Natural Resources’ Horizon oil sands mine and upgrader as well as touring a thermal development, where steam is injected under high pressure to melt deeply buried bitumen deposits, forcing them to the surface.
He described the oil sands as a tricky investment because oil prices must remain high for the crude to be extract economically.
That, he suggested, necessitates an accurate, while challenging long-term call on world oil prices.
“You could be the world’s greatest mining engineer, but if you were wrong about the price of oil in a big way, it would negate all of that knowledge,” Buffett said.
“If you had $120 oil from now until 50 years from now, the tar sands would work out very well. But I don’t know the answer to that.”
Shares of Canadian oil companies with stakes in the oil sands climbed after word of the Buffett-Gates trip and dropped just as quickly Aug. 22 after Buffett’s comments on CNBC.
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