Canceled Teck oil sands mine extends uncertainty for Canadian upstream

Teck Resources' withdrawal of its application for the major Frontier oil sands mine in Alberta exacerbates uncertainty for the Canadian upstream as the country's political leaders clash over climate goals and energy development.

The announcement Sunday did not change S&P Global Platts Analytics' outlook for Canadian oil production, given the Brent-equivalent breakeven price of $60-$65/b needed for the project to be economic and the high level of regulatory uncertainty and environmental pushback, said analyst Parker Fawcett.

"Unfortunately this withdrawal is the worst type of outcome for the industry on the whole, as it does not provide a clear answer either way, rather more ambiguity and uncertainty," Fawcett added.

Teck CEO Don Lindsay called out the Canadian policy fight in a letter to the federal environment minister Sunday, saying the Frontier project could not go forward without a resolution.

"Global capital markets are changing rapidly, and investors and customers are increasingly looking for jurisdictions to have a framework in place that reconciles resource development and climate change, in order to produce the cleanest possible products," Lindsay said. "This does not yet exist here today and, unfortunately, the growing debate around this issue has placed Frontier and our company squarely at the nexus of much broader issues that need to be resolved. In that context, it is now evident that there is no constructive path forward for the project."

Lindsay said the "promise of Canada's potential" will not be realized until governments can reach agreement on climate policy in the context of future energy development.

"Without clarity on this critical question, the situation that has faced Frontier will be faced by future projects and it will be very difficult to attract future investment, either domestic or foreign," he wrote.

Platts Analytics' Fawcett said some Canadian oil sands mines are a source of carbon-advantaged barrels in terms of upstream emissions, despite the major environmental pushback they faced.

Teck's application for the 260,000 b/d project said it would have carbon emissions of 4.1 million mt/year, which works out to a lower carbon-emissions-per-barrel figure than other sources, like California and Venezuela.