| CALGARY, Alberta
CALGARY, Alberta For Exxon Mobil Corp. (XOM.N)
and ConocoPhillips (COP.N) it may appear simple: shift efforts,
people and resources to Canada's oil sands now that the oil
majors have retreated from Venezuela.
In reality, it's no simple matter.
The oil sands have their own set of risks: surging costs
due to a squeezed labor force, technical complexity and a
shrinking pool of attractive available properties.
Exxon Mobil and ConocoPhillips -- who fled Venezuela last
week after refusing to agree to President Hugo Chavez's more
nationalistic terms -- are already among the biggest oil sands
players. They know well that new projects take years to build
as the rush to exploit the unconventional resource fattens
costs and schedules.
"I think everybody in the investment community understands
it's not easy," FirstEnergy Capital Corp. analyst Martin
Molyneaux said. "It might be easy mathematically, but
execution-wise it's unbelievably challenging."
Like Venezuela, Alberta's oil sands offer easy access to
vast amounts of crude. It's a resource second only to the
conventional reserves of Saudi Arabia and one that's recently
gained a big share of the world energy spotlight.
Both Venezuela's and Canada's gooey types of oil are
technically tricky to produce and require expensive upgrading
plants to make them suitable for refineries.
But, unlike Venezuela, the oil sands are marked by
political and fiscal stability.
The combination has become extraordinarily attractive. Oil
firms have pledged to spend more than $100 billion on projects
to exploit 174 billion barrels trapped in the Alberta sand.
The investments have stretched the region's workforce thin
and spawned numerous multibillion-dollar budget overruns.
OIL SANDS VETERANS
Exxon Mobil owns 69.6 percent of Imperial Oil (IMO.TO), one
of the biggest developers. It has 100 percent of the 150,000
barrel a day Cold Lake, Alberta, bitumen project and 25 percent
of the 350,000 barrel a day Syncrude Canada operation.
Exxon Mobil is also a partner with Imperial in the C$8
billion ($7.5 billion) Kearl oil sands project, a 300,000
barrel a day venture, scheduled to start up as early as 2010.
ConocoPhillips last year signed a deal with EnCana Corp.
(ECA.TO) that gave it a major stake in EnCana's oil sands
reserves in exchange for interests in two U.S. refineries.
It also operates the Surmont project, which is slated to
pump 100,000 barrels a day by 2012.
The Alberta government has repeatedly refused to step in
and control the pace of development to rein in the boom. Energy
Minister Mel Knight said last weekend that market conditions
force companies to temper their own pace.
"We will see the major players -- the long term, major
global players -- looking at this situation over a 50-year time
frame. They're spreading out their construction schedules, and
it's working. We can see signs of it already," he said at a
meeting of U.S. and Canadian energy officials in New Orleans.
The Canadian Association of Petroleum Producers expects the
country to produce 4.6 million to 5.3 million barrels a day by
2020, up from 2.6 million last year, and much of that will be
derived from oil sands.
Venezuela produces roughly 3 million barrels a day,
according to the OPEC member's officials.
INFLUX OF TALENT
One benefit for Canada from Venezuela's shifting energy
scene will be an influx of transferable technical talent and
badly needed skilled workers, analysts and executives said.
"So if there's anything positive that comes from these
shenanigans with Chavez, it's people they can turn loose on
other projects," Molyneaux said.
Some field workers from Venezuela, where state-controlled
oil company PDVSA holds sway, are toiling in Canadian energy
hot spots, like Fort McMurray, Alberta.
Petro-Canada PCA.TO Chief Executive Ron Brenneman said he
doesn't think Venezuela's nationalization push will bolster
Alberta's stretched construction workforce by a large degree.
Petro-Canada, which also exited Venezuela last week, leads
the group planning the C$14.1 billion Fort Hills oil sands
"We are finding that some pretty good technical people are
coming available out of PDVSA as a consequence of what's going
on down there, but I don't think it will affect the labor pool
to a large extent," Brenneman said.
(Additional reporting by Russell McCulley in New Orleans)