| CALGARY, Alberta
CALGARY, Alberta Dec 23 Canada's oil sands
prospects were buoyed by recent pipeline approvals, but news of
two companies ditching local projects on the same day served as
a reminder that industry confidence is still weak.
Investment decisions have been relatively modest in the
high-cost environment as the oil patch faces uncertain export
routes and a tough emissions cap.
Ottawa last month approved the Kinder Morgan Inc
Trans Mountain and Enbridge Inc Line 3 pipeline
projects, a welcome boost to the industry, which has long pushed
to resolve export congestion that kept Canadian crude priced at
Still, Norwegian oil major Statoil ASA, which in
2014 cited market access for deferring its Corner oil sands
project, said on Dec. 14 it would sell all its assets at a loss
and withdraw from Canada's oil sands.
The same day, Koch Industries Inc announced it
wants out of a yet-undeveloped local project. The Alberta Energy
Regulator (AER) approved that request this week.
Statoil spokesman Erik Haaland said the sale was made so the
company can concentrate on "new competitive assets" elsewhere.
Koch did not respond to requests for comment.
In a letter to the AER seen by Reuters, a local executive
cited the province's environmental regulations.
Alberta, home to the third-largest crude reserves in the
world, has one of the biggest extraction costs and higher
emissions levels, on which the left-leaning provincial
government has placed a hard cap.
Don MacIntyre, the electricity and renewables critic for
Alberta's Wildrose opposition party, said the 100-megaton cap
leaves only about 30 megatons for future development.
The cap will cause more operators with undeveloped lands -
such as Koch - to abandon their Canadian projects, he said.
"The cap on emissions is actually a cap on development,"
To be sure, stability in oil prices over the past year and a
commitment by major producers to trim output has raised hopes
for better times ahead.
But companies are moving forward gingerly, with those that
are announcing restarts of projects and rising capital budgets
ready to pull back if needed.
Canadian Natural Resources Ltd said it may roll
back its budget by nearly C$1 billion if prices fall. Athabasca
Oil Co has been noncommittal about restarting the
Statoil Corner project it acquired, saying it is "prospective"
only when "oil prices can clearly support it."
Alberta Energy Minister Marg McCuaig-Boyd in a statement
attributed the industry's hesitancy to "the low and volatile
price of oil," and not regulations.
The approved pipelines, while offering future greater export
capacity, are also no silver bullet for the industry.
"The Trans Mountain expansion and Line 3 - there's still
uncertainty around the timing on those," said Wood Mackenzie
analyst Stephen Kallir, noting the first lawsuit against Trans
Mountain since its approval was filed on Tuesday.
"Deals like these don't happen overnight."
($1 = 1.3370 Canadian dollars)
(Editing by G Crosse)