The Wall Street Journal

Canada’s Oil Sands May Gain From Deepwater Drilling’s Pain
The Wall Street Journal

The oil spill in the Gulf of Mexico could make crude production from Canadian oil sands, long reviled by environmentalists, look more appealing.

The inadvertent benefit to the oil-sands industry from the spill may be more than just cosmetic, with deepwater drilling likely to face higher costs from new regulations as a result of the disaster. The great expense and particular environmental risks of oil-sands development could look ever more bearable compared with the potentially catastrophic consequences of deepwater drilling. Any eventual shift of investment from the Gulf into the oil sands could also be a boon for the Canadian dollar and the country’s economy.

Crude from oil sands and deepwater wells has only become economical to extract over the past several years as oil prices have risen and technology has advanced. Both sources are much more expensive than conventional oil production. Both methods require oil prices of between $50 and $60 a barrel to be profitable, said BMO Capital Markets analyst Randy Ollenberger. The Gulf spill, however, is likely to lead to regulations that could increase the costs of deepwater oil production beyond that of developing oil sands, he said.

Analysts Ollenberger and Friesen said oil-sands production poses fewer environmental risks than deepwater-oil drilling. « You don’t have the same potential for environmental disaster as you do in the Gulf, » Ollenberger said.