Talisman Energy to stay out of oil sands

Talisman Energy Inc. will stay out of the oil sands and stick to its strategy of diverse international holdings, Talisman chief executive Jim Buckee said May 3.

Difficult land positions, high heavy oil differentials and unproven technology will keep Talisman away, even though oil sands projects are all the rage right now with companies enjoying strong boosts in share value as a result, he said Tuesday.

“I think the reasons we’ve stayed out of it remain true,” Buckee said following Talisman’s annual shareholder meeting in Calgary, where it unveiled an 18 percent increase in first quarter profits to $258 million.

A lot of the good land holdings were picked up before 1979 by Exxon and

Shell, Buckee said of the oil sands, where a long list of multi-billion dollar projects await construction.

“A lot of people are having to deal with less-than the best acreage.

And so latecomers get worse acreage,” he added.

Buckee also said the growing price differentials between the raw bitumen coming out of northern Alberta and refined, synthetic crude are so substantial that companies are “forced” into building upgraders — which tends to be the most expensive and complex part of oil sands projects.

“When we go out to look at the mining/upgrading operations, we see very little that we can recognize. This is not really our business — the only common thing is that oil comes out of the end.”

Buckee’s two main Canadian-based contemporaries, Nexen Inc. and Canadian Natural Resources Ltd., have both embarked on large, multi-billion-dollar oil sands projects which will transform them away from being traditional exploration and production companies.

All of the existing oil sands producers have extensive expansion plans, while newcomers like Devon Energy, ConocoPhillips and Husky Energy are just beginning to build their projects.

Canada’s oil sands are also attracting international attention, with one state-owned Chinese company recently buying an equity stake in small oil sands lease-holder MEG Energy Corp. But Buckee said the steam technology that most companies are betting on to harvest bitumen located too deep for convention open-pit mining are “unproven — it’s a very strong function of reservoir quality, and if you’ve got anything but the best, it’s likely that your economics are very poor.”

Instead, Calgary-based Talisman said it can make better returns with its more conventional oil and gas businesses, which are outside of Canada.

—The Associated Press