Oil sands investor risks

Investor risks

A number of uncertainties exist that have serious implications for the financial viability of the continued exploitation of the oil sands.  The massive investments being pumped into Alberta could drain away rapidly.


Regulatory climate

The trend is moving towards increased regulation of carbon intensive activities and demands for a carbon-constrained economy are growing. California has developed a Low Carbon Fuel Standard, which restricts fuels with lifecycle CO2 emissions that are greater than conventional sources.  This is being considered in other states in the USA and provinces of Canada.  It could result in the fuel derived from the tar sands being prohibitively expensive.

The infrastructure and inputs required to develop the tar sands is capital intensive, and increases in the cost of natural gas, machinery, chemical thinners, labour and water, along with investment in technology to reduce environmental impacts, will reduce profit margins.
The Canadian tar sands are the biggest construction project on the planet and have the highest levels of capital investment (1). Shell reported increases in operating costs of 50% in 2 years in its 2008 Annual Report.

The development of the tar sands requires a high price of oil for it to be economically viable. Recent trends have thrown this into doubt.

If CCS becomes functional, the issue of who will be responsible for the sequestered carbon has not been resolved.  Along with the tailing ponds, it could present a long term environmental liability for energy companies and their investors.

Legal challenges from First Nation communities present considerable litigation risks, particularly with regard to health impacts.