The oil-sands region of Canada is steadily becoming one of the most talked about areas in the industry, with companies from every corner of the globe announcing their desire to capture a piece of the action, but at what cost? In 2006, many of the companies operating commercial oil-sands projects announced either changes to their original plans or cost increases, which have resulted in an average growth in initial capex per peak flowing barrel of 32% for integrated mining projects and 26% for in-situ developments. In addition, the average sale price for land in the oil-sands region was US$114,654 per square kilometer (US$460/acre) in 2006, a 14% increase from 2005 and 434% higher than in 2004. By comparison, the price is 21 times higher than that for leases along the Alaskan North Slope. In 2006, 857 leases in the oil-sands region were awarded, covering more than 15,000 square kilometers-a dramatic increase from the previous three years during which there were 764 leases awarded involving some 7,000 square kilometers. Bonus payments far exceeded the combined levels of 2003, 2004 and 2005. They amounted to some US$1.75 billion, almost a fivefold increase from the US$360 million paid in 2005. The Athabasca area attracted the highest premiums and accounted for 75% of the leases awarded. For more on this, see the April issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

Comments