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Canadian tar sands offer lessons for American shalemen

27 Feb 2020

ALBERTA HAS lured many an oilman in recent years. Tapping new wells of thick Canadian bitumen and processing it into crude is expensive, but the break-even oil price for operating an existing one can be as low as $25. Large reserves and low depletion rates mean that companies can offer measured growth and attractive dividends. Instead of lubricating profits, however, Canada’s tar sands are bunged-up with protests against new pipelines. Most international oil firms have fled. The latest firm to retreat is Teck Resources. On February 23rd the Canadian company scrapped plans for a C$20bn ($15bn) oil-sands mine. Canada has not yet aligned “climate policy considerations” with “responsible energy sector development”, wrote Teck’s boss, Don Lindsay. Without regulatory approvals, an investment partner, new pipelines and a high oil price, Teck might as well have sought the Moon.

Things are looking rather different south of the border. Fracking a virgin shale bed is simpler—and cheaper—than mining a new tar pit. American crude production surged by 94% from 2011 to 2018, hitting Canada twice over: by pushing down the oil price and sucking away investment. Canadian oil output rose only two-thirds as fast. Chevron and ExxonMobil are among the global energy giants to pump capital into America’s vast Permian basin in Texas and New Mexico; the pair...

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This content was originally published by The Economist: Business. Original publishers retain all rights. It appears here for a limited time before automated archiving. By The Economist: Business

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