Canadian Oil Sands: Six Constraints to Growth

After many years of being dismissed as a high-cost fringe activity, Canadian oil sands have been embraced by the oil industry as a mainstream approach to achieving reserve growth and energy security. Canadian oil sands represent one of the earth's largest oil reserves, attracting an estimated US$80 billion of new investment over the next ten years. This Decision Brief examines some of the critical constraints that producers face. It will be followed by a Private Report that analyzes the innovations under way to address them.

* Opportunity is coupled with challenges, and the rapid growth of oil sands projects presents the industry with six critical constraints that may limit their development.
* Shortages of skilled labor and escalating capital costs are eroding project economics and frustrating potential investors.
* Critically needed regional condensate supplies and facilities to upgrade bitumen are affecting the growth of new oil sands in-situ projects.
* Natural gas is the largest component of heavy oil operating costs. Prices have exhibited high volatility and increased by 150 percent, eroding profit margins and increasing economic risks.
* As Canadian production has increased, the traditional downstream markets in the US Midwest have become saturated.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.