‘Dog that got the car’: Oilpatch is getting what it wanted, but will companies build?

Alberta Premier Danielle Smith aims to double oilsands output in the next decade, and industry players find the idea of bringing new projects to the forefront more appealing due to recent federal and provincial government policy changes. These changes include reversing environmental policies from the Trudeau era, making more investments eligible for immediate tax deductions, and sharing the investment burden in the proposed Pacific Link pipeline to southern B.C.

However, experts suggest any significant upstream investments will have to compete with the industry's preference for dividend growth and share buybacks, while avoiding the high costs of past projects.

Michael Berger, a senior Enverus analyst, states that oil producers have been focusing on debt repayment and shareholder returns, and he expects this trend to continue. The large oilsands operators have multi-decade production profiles, and balancing shareholder distributions with prudent capital allocation for growth will be a challenge.

Chris Seasons, a former Devon Canada leader, recalls the "go go go" mindset of the oilsands from 2000 to 2014, where investors prioritized growth, leading to rushed projects and higher capital costs.

Top executives of major oilsands producers, such as Imperial Oil's John Whelan and Suncor Energy's Rich Kruger, express optimism about pursuing growth under the right conditions. Whelan noted that the company will consider accelerating the decision on its three steam-driven oilsands projects, while Kruger mentioned the possibility of scaling up Suncor's in-situ projects.

Cenovus Energy aims to utilize its proposed $5.7-billion acquisition of Athabasca Oil Corp. to expand oilsands production, and the company's CEO, Jon McKenzie, sees the new tax policy, royalty changes, pipelines, and regulatory efficiency as key enablers of growth projects.

The Pathways carbon storage project, first proposed in 2021, is essential for moving forward with the Pacific Link pipeline, and both Ottawa and Alberta are in talks to establish an agreement that ensures the project's progress while promoting increased oilsands output. Canadian Natural Resources Ltd. will hinge its growth plans on the outcome of these negotiations, according to president Scott Stauth.

Experts believe that the oilsands could see a mix of redeveloping existing projects, expansions, and new developments, depending on the pace of capital deployment.