FORT MCMURRAY, Alta. – In a sign that the oilsands mining industry can’t be counted out just yet, public hearings into the proposed $20.6-billion Frontier Oil Sands Mine project begin in Fort McMurray, Alta., today.
International oil companies are cutting their oilsands mine investments and many analysts say the long-life returns don’t justify the high upfront costs, but Vancouver-based Teck Resources Ltd. says it is committed to its megaproject which could be producing oil by 2026.
“We believe the long-term outlook for the global oil market is favourable for projects like Frontier,” said Doug Brown, Teck’s director of public affairs, reached in Fort McMurray on Monday.
“Given the current project timing, and the future demand we see, we think it’s a strong project to move ahead.”
Teck’s pursuit of regulatory approval of Frontier is a rare positive sign for oilsands mining, said Kevin Birn, vice-president of North American crude oil markets for IHS Markit.
“The regulatory process is not a cheap process so this is a good indicator for the sector,” he said.
The oilsands industry slowdown of the past four or so years means that Teck should find construction and operating costs will be lower than during the boom years and they should be able to integrate the latest and most efficient technologies into Frontier, if it is approved and sanctioned, he said.
Still, the company’s estimates suggest the strip mine project will cost about $80,000 per flowing barrel of oil, which is much higher than the $40,000 to $50,000 estimated to build a new steam-driven thermal oilsands project, Birn said.
Teck is scheduled to kick off the hearings today before a joint review panel of the Alberta Energy Regulator and Canadian Environmental Assessment Agency, with the rest of the week devoted to cross-examination by interveners.
The second week of the five-week hearing is to start with a presentation by the environmental group Canadian Parks and Wilderness Society.
Frontier would be built in two phases of 170,000 bpd and 90,000 bpd and would have a mine life of 41 years, delivering more than $70 billion in taxes and royalties to all levels of government over that period, the company says.
It is to create about 2,500 permanent jobs and employ about 7,000 people during construction on its site about 110 kilometres north of Fort McMurray.
The hearings begin just weeks after French oil giant Total SA and its partners agreed to sell their proposed Joslyn oilsands mining project north of Fort McMurray for $225 million to Calgary-based Canadian Natural Resources Ltd., which operates the nearby Horizon oilsands mine.
Total and Anglo-Dutch energy company Royal Dutch Shell have been reducing oilsands mining investments in recent years.
Teck owns about one-fifth of the $17-billion Fort Hills mining project opened earlier this year by Suncor Energy Inc. and hopes to leverage the technical knowledge it has gleaned from Fort Hills to help develop Frontier.
Suncor CEO Steve Williams has repeatedly said his company will not approve new major oilsands projects until there is real progress in expanding Canadian export oil pipeline capacity.
Teck has secured 13 participation agreements with the region’s Cree, Dene and Metis communities, Brown said, including its latest deal with the Athabasca Chipewyan First Nation, and it is continuing to negotiate with the Mikisew Cree First Nation to win its support as well.
He said the mine will be the most advanced in the oilsands in terms of emissions, will be progressively reclaimed and will employ centrifuges to reduce the volumes of liquid in tailing ponds, requiring less overall water.
Frontier, which was first proposed as a four-phase project in 2011, is to be built near Wood Buffalo National Park.
Companies in this article: (TSX:TECK, TSX:SU)