* Oil drops on economic fears
* TSX energy index at lowest in more than 2 year
* Oil sands project still profitable at current prices
CALGARY, Alberta, Sept 22 A sharp drop in oil
prices is no threat to plans to accelerate development of
northern Alberta's oil sands even as it pushes the shares of
Canada's biggest oil producers sharply lower, an analyst said
Fears of a new recession, spurred by weak manufacturing
data from China and a glum outlook on the U.S. economy issued
on Wednesday by the U.S. Federal Reserve, pushed benchmark
North American crude futures down by $5.41 to $80.521 a barrel,
the lowest level since Aug. 9.
The price drop sent the shares of Canada's biggest oil
producer, Suncor Energy Inc (SU.TO), tumbling. Suncor fell
C$1.92, or 6.8 percent, to C$26.21 on the Toronto Stock
Shares of Suncor's rivals were also sharply lower. Nexen
Inc NXY.TO dropped 86 Canadian cents, or 5 percent, to
C$16.42, and Husky Energy Inc (HSE.TO) fell 99 Canadian cents,
or 4.3 percent, to C$21.94. The Toronto market's index of
energy shares .SPTTEN fell 4.7 percent to 243.01, its lowest
level in more than two years.
Though the lower prices will bite into profits, they are
unlikely to force the big producers to winnow down plans to
expand their oil sands operations, said Andrew Potter, an
analyst at CIBC World Markets.
The oil sands of northern Alberta are the world's
third-largest crude reserve. Production from the region is
expected to rise to 2.1 million bpd by 2015 from about 1.5
million bpd currently.
Integrated oil companies such as Suncor and Husky, which
produce and refine oil are still making rich profits on the
sale of gasoline and other refined products, while big oil
sands projects are still profitable at current oil prices,
"The integrated and the big oil sands (companies) would
probably need to oil move below $70 a barrel before we'd see
any big cutbacks on oil sands spending," he said.
"The integrateds are still getting big cash flow from
downstream, liquidity is in good shape, balance sheets are in
good shape ... so for the big long-term projects we're not
going to see cutbacks yet."
(Reporting by Scott Haggett; editing by Peter Galloway)