The break-even price for western Canada oil sands fell from 2014 to 2018, with and IHS Markit report estimating the expansion of an existing thermal operation could break even with a West Texas Intermediate (WTI) price of $45 per barrel (bbl) compared to a break-even price of more than $65/bbl in 2014. The break-even price for a mining operation without an upgrader would need WTI prices to be $65/bbl compared to about $100/bbl in 2014.

Despite the improving economics, investments in Canadian oil sands projects are projected to drop to a 15-year low in 2019. According to IHS Markit, new capital investments in the region are expected to be about $8 billion, which is well off the pace of the $33 billion in investments in 2014.

“All signs continue to point to a further deceleration in growth,” the report said. While it’s tempting to conclude that the oil sands of western Canada are too costly to develop and therefore can’t compete with other regions for capital investments, the report notes that regional price volatility is more to blame than high project costs.

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