Three Catalysts for Growth in the Canadian Oil Sands - Investors Stand to Benefit
The explosion on the Deepwater Horizon oil rig back in April of 2010 spurred an unprecedented global interest in exploring more accessible sources of oil.
On the short list were the Canadian oil sands.
With an estimated 3.
8 trillion barrels of solid or semi-solid forms of petroleum, there is no doubt that the area is rich with oil.
But only a fraction of that (less than 5%) is accessible with current technologies.
However, it is estimated that over 8% could become accessible with technological improvements.
That may not sound like much, but 8% of the oil sands would produce 315 billion barrels, which would likely be the largest resource base in the world, emphatically surpassing Saudi Arabia estimated to 275 billion barrels.
The implications for Canada are huge.
Canada was the 6th largest oil producer in 2008 and could become in the top 4 or 5 in the next 20 years.
There are several key catalysts that suggest significant growth in the sector.
Catalyst #1:New Project Approval The global recession shelved a number of projects across all sectors, but projects that were previously being put on hold are now getting approved.
As this trend continues, confidence in the viability of the oil sands will grow.
Large companies such as Suncor Energy and Canadian Natural Resources are expected to announce significant new initiatives, and as this begins to happen confidence in the viability of the oil sands will grow, making investment opportunities look very attractive to investors.
Catalyst #2: Technological Advancements Technological advancements under development will allow for oil to be extracted from the oil sands with become more efficient and cost-effective.
Cenovus Energy, for example, is developing a process that is expected to improve production rate by 30% and cut nonfuel operating cost by 5% to 10%.
Another company, Petrobank Energy & Resources Ltd.
has plans to begin implementing a patented technology that has the potential to open up new areas for extraction, and increase extraction to 70% or 80% up from the current 20% to 50%.
Catalyst #3:Increased Merger and Acquisition Activity Unlike some other jurisdictions that are closing the doors to foreign investment or becoming too expensive, the Canadian government has been welcoming of foreign investments.
This, coupled with the high risks associated with other jurisdictions such as the Gulf of Mexico, activity in the number mergers and acquisitions is expected to continue.
Already, companies in China have invested heavily with joint ventures, such as the Athabasca PetroChina joint venture, and acquisitions such as the Sinopec acquisition of ConocoPhillips' interest in Syncrude.
Furthermore, CNPC, the Chinese state oil company, has expressed interest in creating an alliance with Alberta to help China meet their energy needs.
And China is not the only country making these moves.
A company in France, Total SA, made a $1.
5-billion acquisition of UTS Energy.
With these three catalysts in place a number of investment opportunities exist.
Share prices, which are currently trading at a discount compared to their ex-future oil sands projects valuations, could rise considerably as the potential in the oil sands becomes realized.
Currently the market is remains generally hesitant to pay for the future oil sands and this is creating a potentially lucrative opportunity for investors.
On the short list were the Canadian oil sands.
With an estimated 3.
8 trillion barrels of solid or semi-solid forms of petroleum, there is no doubt that the area is rich with oil.
But only a fraction of that (less than 5%) is accessible with current technologies.
However, it is estimated that over 8% could become accessible with technological improvements.
That may not sound like much, but 8% of the oil sands would produce 315 billion barrels, which would likely be the largest resource base in the world, emphatically surpassing Saudi Arabia estimated to 275 billion barrels.
The implications for Canada are huge.
Canada was the 6th largest oil producer in 2008 and could become in the top 4 or 5 in the next 20 years.
There are several key catalysts that suggest significant growth in the sector.
Catalyst #1:New Project Approval The global recession shelved a number of projects across all sectors, but projects that were previously being put on hold are now getting approved.
As this trend continues, confidence in the viability of the oil sands will grow.
Large companies such as Suncor Energy and Canadian Natural Resources are expected to announce significant new initiatives, and as this begins to happen confidence in the viability of the oil sands will grow, making investment opportunities look very attractive to investors.
Catalyst #2: Technological Advancements Technological advancements under development will allow for oil to be extracted from the oil sands with become more efficient and cost-effective.
Cenovus Energy, for example, is developing a process that is expected to improve production rate by 30% and cut nonfuel operating cost by 5% to 10%.
Another company, Petrobank Energy & Resources Ltd.
has plans to begin implementing a patented technology that has the potential to open up new areas for extraction, and increase extraction to 70% or 80% up from the current 20% to 50%.
Catalyst #3:Increased Merger and Acquisition Activity Unlike some other jurisdictions that are closing the doors to foreign investment or becoming too expensive, the Canadian government has been welcoming of foreign investments.
This, coupled with the high risks associated with other jurisdictions such as the Gulf of Mexico, activity in the number mergers and acquisitions is expected to continue.
Already, companies in China have invested heavily with joint ventures, such as the Athabasca PetroChina joint venture, and acquisitions such as the Sinopec acquisition of ConocoPhillips' interest in Syncrude.
Furthermore, CNPC, the Chinese state oil company, has expressed interest in creating an alliance with Alberta to help China meet their energy needs.
And China is not the only country making these moves.
A company in France, Total SA, made a $1.
5-billion acquisition of UTS Energy.
With these three catalysts in place a number of investment opportunities exist.
Share prices, which are currently trading at a discount compared to their ex-future oil sands projects valuations, could rise considerably as the potential in the oil sands becomes realized.
Currently the market is remains generally hesitant to pay for the future oil sands and this is creating a potentially lucrative opportunity for investors.