New Report Finds Oil Sands Production Costs Below U.S. Tight Oil

Canada’s oil sands are often thought of as one of the world’s most expensive, marginal sources of crude. That may not be the case, however, according to a new report by Scotiabank Economics. After examining more than fifty plays across Canada and the United States, the report found that, on average, Canada has lower full cycle breakeven oil production costs than the United States. Moreover, the report found that the oil sands have lower associated production costs than the “light, tight” crude from American shale that is upending the North American oil market. On average, Canadian oil production was found to have an average full cycle breakeven cost of between $63 and $65 per barrel as compared to the U.S. average of $72. The oil sands also have stability—we know where the Athabasca oil sands are and how much oil they hold. This gives the oil sands a competitive edge over tight oil production. The rapid decline of tight oil wells makes it difficult to justify multi-billion dollar fixed pipeline infrastructure—within a few years, a well’s productive prime could be behind it. The EIA estimates that simply maintaining production at 1 million barrels per day in the Bakken requires 2,500 new wells per year. The Athabasca oil sands, on the other hand, will be producing for decades to come, making future production more predictable and expensive infrastructure investment more palatable...more