PTTEP further delays Alberta oil sands project

Thailand’s PTT Exploration & Production PCL (PTTEP) will delay its final investment decision on the 612-square kilometre Mariana Oil Sands Project near Athabasca, Alberta, according to a Reuters report. PTTEP also will record a US$550-million impairment in its third-quarter earnings.

The Thai state firm originally signed on to the concession in May 2014 after dividing interests with Statoil ASA. At that time, Statoil took 100% ownership of the Leismer and Corner development projects, while PTTEP assumed 100% of the Thornbury, Hanginstone, and South Leismer areas. At the closing, Statoil paid PTTEP US$200 million as well as a working capital adjustment of C$238 million.

Statoil, along with Royal Dutch Shell, ConocoPhillips, and Marathon Petroleum Corporation have withdrawn from Canada’s oil sands as of midyear.

The Canadian Energy Research Institute estimates that field-gate costs for stand-alone oil-sands mines have fallen by 6% since 2015 and for steam-assisted gravity drainage projects by 27%. Most future production in the oil sands will come from SAGD and other in situ methods.

Costs of production from oil-sands projects of all types remain high. After adjustment for blending and transportation, CERI’s estimate of the West Texas Intermediate-equivalent supply cost for output from a hypothetical SAGD project at Cushing, OK, is US$60.52/bbl.

For a stand-alone mine, it’s US$75.73/bbl. Still, the WTI-equivalent cost for a greenfield project is 25% lower than it was a year ago. For a stand-alone mine, it’s 16% lower.

PTTEP cited weak oil prices for its project delay, Reuters said.

Despite this trend, CERI estimates that oil sands projects will remain a profitable long-term investment through 2036.

PTTEP’s impairment marks its third on the Marianas oil sands project since 2014, totalling US$1.8 billion.