The decision by Teck Corporation to abandon the application for a $20 billion oilsands mine in northern Alberta resulted in much finger pointing at Prime Minister Justin Trudeau by provincial politicians.
It was another slap in the face to the resource-rich Alberta by the climate change urban Liberals — was the Western interpretation.
The application withdrawal saved Trudeau like a bell ending the round in the boxing ring. No matter what decision he would have made it was lose-lose for him.
The fact is, if you strip away all the political bull crap from the discussion, this was purely a business decision masked by Teck management as a blockade by climate change policy.
Eight years ago when this massive mine was first planned, the scene was rather different. The benchmark WTI oil price was around $80US and rising like raging flood waters.
Three pipelines to carry increased oil production to market were planned.
In 2020, it looks like one of those pipelines, the Line Three expansion, will get built. One was scrapped, one faces an uncertain future with First Nations blockades.
Oil prices have slumped to the $45 to $50 a barrel range. Viability of the Frontier mine is sketchy. The CEO admitted just weeks before the application withdrawal that no profits would be made until 2026.
His admission came after an independent accounting firm’s analysis suggested the mine may never turn a profit.
Faced with this unprofitable scenario, Teck was unable to find a partner to share the $5 billion down payment, let alone a banking consortium to put up $15 billion in loans.
The best way to hide the bad management decision from shareholders was to blame climate change policy or lack of a clear policy.
What banker, investor or manager in his right mind would pursue dumping $20 billion into such an uncertain venture?
While the provincial politicians rail at the feds other events show a global loss of credibility by the oil/pipeline industry.
A $1 billion pipeline to move natural gas to New York was scrapped the same week as Frontier based on strong environmentalist opposition.
A deep well drilling project offshore of Australia was cancelled that week for the same reasons.
In Oregon the Federal Energy Regulatory Commission (FERC) voted against permitting an LNG gas project, first proposed five years ago. The commission wanted the developer, a Canadian outfit, to have more export production sold before construction starts.
No more buyers are to be found. LNG prices have slipped 40 per cent in a few years.
Glutted global oil and natural gas markets are out of reach. And rightly or wrongly strong environmental opposition to fossil fuels has created a no-win situation for the industry.
Unfortunately this could be the new world order until a shortage of oil and gas create project viability in some far off day.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
