| CALGARY, Alberta, March 9
CALGARY, Alberta, March 9 The exodus of
international players from Canada's costly oil sands is raising
fresh doubt over future development prospects for the world's
third-largest crude reserves as the region struggles to compete
with cheap U.S. shale plays.
The latest withdrawals from the oil sands have cast a pall
on Alberta's economic outlook. The energy sector makes up one
sixth of Canada's economy, while in Alberta oil and gas
contributes a fifth of provincial gross domestic product.
Royal Dutch Shell and Marathon Oil Corp
sold off billions of dollars in oil sands assets on Thursday,
the latest sign that global oil majors are abandoning the
Shell Canada President Michael Crothers said the company was
selling a large chunk of its oil sands assets to Calgary-based
Canadian Natural Resources Ltd because they did not fit
within Shell's international portfolio, while Marathon more
explicitly summarised the problem.
"Historically, our interest in the Canadian oil sands has
represented about a third of our company's other operating and
production expenses, yet only about 12 percent of our production
volumes," chief executive Lee Tillman said in a statement.
As well as selling off a 20 percent stake in the Athabasca
Oil Sands project, now majority-owned by CNRL, Marathon is
buying 70,000 net acres in the Permian basin shale play as it
streamlines its portfolio to concentrate on higher margin, lower
cost U.S. assets.
Canada's oil sands carry some of the world's highest full
cycle breakeven costs and were battered by the global crude
price crash that started in 2014. Capital investment in the
Canadian energy sector tumbled 62 percent in two years,
according to the Canadian Association of Petroleum Producers,
and shows little sign of recovering.
Rafi Tahmazian, senior portfolio manager at Calgary-based
Canoe Financial LP, said stricter federal and provincial
environmental polices were deterring foreign investors and
Canada alone did not have the financial capacity to drive oil
"There's no incentive for foreign investment to say let's go
into Canada," he said. "The message sent (by government) is we
want Canada to become a national park, which is
government-operated and non-revenue generating."
Tahmazian said recent comments by Prime Minister Justin
Trudeau that the oil sands needed to be "phased out", which
Trudeau later backtracked on, reinforced that message.
Oil-rich Alberta was plunged into recession with the global
crude prices crash and a permanently weakened energy industry
would likely have long-term knock-on effects, some analysts
"This ... will eventually force the Alberta economy to
restructure and diversify its economic engine," said Benjamin
Tal, senior economist at CIBC.
(Reporting by Nia Williams; Editing by Andrew Hay)