Exploring the top 10 opportunities and risks in Canada’s oilsands 2012–13

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Companies operating in Canada’s oilsands industry will have to manage a number of new opportunities and risks to be successful now and in the future.

Our annual report puts Canada’s oilsands under the microscope and identifies the top 10 opportunities and risks facing the industry as drawn from our research and conversations with leaders and executives from a number of operators, pipeline companies, oil field service companies, government and associations.

World oil reserves

World oil reserves

Source: Oil & Gas Journal, December 2011

The top 10 opportunities

With a politically stable economy, strong legal and business systems, unparalleled proximity to the US market and access to world-class expertise, Canada is one of the most attractive markets in the world for inbound investment.

Here are the top 10 opportunities for working with Canada’s oilsands.

  1. Global demand is growing. Demand for hydrocarbons continues to grow despite short-term softening in some markets.
  2. Oilsands remain economically important for Canada. Canada’s oil and gas industry is the number-one sector in terms of GDP contribution.
  3. Canada remains an attractive place to do business. Economic and political security continues to put Canada at the forefront of foreign investment.
  4. Technological innovation advances. Early adopters and fast followers stand to gain a competitive advantage.
  5. Environmental awareness is increasing. Focus on environmental innovation and investment means long-term benefits for industry.
  6. Foreign interest is growing. Foreign investment can accelerate the development of Canada’s hydrocarbons.
  7. Project activity is increasing in a controlled way. Companies are evaluating the pace and size of projects to control risk.
  8. The business model is evolving. Changing industry dynamics are creating opportunities for new market entrants.
  9. Players are working together. Companies are collaborating to better the industry, the marketplace and the environment.
  10. The US remains a key customer. Canada continues to be highly integrated into the US economy.

The top 10 risks

Canadian companies will have to tie down new long-term customers, accelerate infrastructure development and seek new capital sources, to make their mark on the world stage.

Here are the top 10 risks for working with Canada’s oilsands.

  1. Rising supply and falling demand in the US. The US is well on track to outpace foreign markets in oil production in the next 10 years.
  2. Market access and infrastructure constraints. Window of opportunity to serve foreign markets is finite.
  3. Cost inflation. Significant signs of cost inflation create long-term concerns.
  4. Labor availability. Increased project activity continues to exacerbate skills shortage.
  5. Environmental impact. Environmental issues continue to impact public acceptance of new projects and industry activities.
  6. Reputation management. Oilsands reputation remains at forefront of discussion.
  7. Large upfront capital investment. Companies undertaking projects with steep price tags turn to partnerships.
  8. Changing policy and regulation. Inconsistencies between federal and provincial standards create challenges for compliance.
  9. High demand for water. Companies hesitant to invest in technology face obstacles to reduce water usage levels.
  10. First Nations relations. External and internal stakeholders a direct determinant of success.