By Nia Williams
CALGARY, Alberta, Jan 19 (Reuters) - All of Canada's 2.3
million barrels per day of oil sands output is being produced at
a steep loss at current crude prices, despite the weak Canadian
dollar and a sharp squeeze lower in operating costs, analysts at
TD Securities said on Tuesday.
Alberta's oil sands hold the world's third-largest crude
reserves but also carry some of the highest operating costs
globally due to energy-intensive production methods and the
billions of dollars needed to start up new projects.
The cost of extracting tar-like bitumen now far exceeds the
price of a barrel of U.S. crude, which this week crashed to its
lowest level since 2003 at just over $28 a barrel. O/R
TD Securities said its analysis of 10 of the biggest
projects in northern Alberta showed breakeven oil prices in
January for thermal projects had come down 18 percent from a
year ago, while breakeven prices for mining projects were down
21 percent.
The drop in the Canadian dollar to $0.69 from $0.80 a year
earlier helped cut costs for producers, who have also slashed
tens of thousands of jobs, pressured suppliers for discounts and
reined in spending.
The average breakeven oil price for thermal projects, which
pump steam underground to liquefy bitumen and pipe it to the
surface, is now $39.67 a barrel.
The breakeven price for mining projects, the majority of
which upgrade their bitumen into higher-priced synthetic crude,
comes in at $35.34 a barrel on average.
U.S. crude CLc1 has not traded above those levels since
early December.
"At the current levels, no project is capable of generating
sufficient cash flow to cover cash costs including sustaining
capital," TD analysts wrote in a note.
The analysis took into account project operating costs,
royalties, transportation, the assumed cost of condensate used
to dilute bitumen so it can flow through pipelines and
sustaining capital requirements.
MEG Energy Corp MEG.TO has the most efficient thermal
project at Christina Lake with a breakeven of $37.74 a barrel,
while Canadian Natural Resources Ltd's CNQ.TO Horizon facility
is the most efficient mining project at $29.71 a barrel.
(Editing by David Gregorio)