New Delhi: State-owned Indian Oil Corp. Ltd (IOC) has put on hold its plan for acquiring stakes in oil sand blocks in Canada. The change in strategy is because the acquisition would be financially viable only when crude oil prices are at $60 (Rs2,916 now) per barrel compared with $38 per barrel today.
Even a small stake in oil sand blocks could run into billions of dollars, simply because it is very expensive to extract oil from oil sands—which are essentially deposits of bitumen (a kind of coal)—that is first converted to crude oil using specialized technology and then further refined to produce petroleum products.
“The oil sands project does not make sense today. They were a very good opportunity when the crude oil prices had crossed the $100 per barrel mark. Moreover, they also face a lot of environmental problem,” said a senior IOC executive, who did not want to be identified, during the Petrotech 2009 being held in New Delhi.
Ron Stevens says oil sands are an incredible source.
Mint had on 25 February reported IOC’s plan to acquire stakes in oil sand blocks in Canada in an attempt to secure oil supplies for its refineries and strengthen India’s energy security.
Canada’s oil sands are estimated to have reserves of 173.7 billion barrels; they currently produce a million barrels a day of crude. Understandably, the owners of Canadian oil sand blocks are, for their part, keen on foreign investment because of the high capital expenditure, estimated at $123.55 billion, required for commissioning future oil sand projects.
Ron Stevens, deputy premier and minister of international and inter-governmental relations, province of Alberta, Canada, told Mint during Petrotech 2009 that he was convinced there would be enough takers for the projects.
“Oil sands are an incredible source and I have no doubt that will be developed. We have a world-class regulatory system and we were the first in North America to come out for greenhouse regulation,” he said.