adjusted for inflation)
In mid-2006, the National Energy Board of Canada estimated the operating cost of a new mining operation in the Athabasca oil sands to be C to C per barrel, while the cost of an in-situ SAGD operation (using dual horizontal wells) would be C to C per barrel. This compares to operating costs for conventional oil wells which can range from less than one dollar per barrel in Iraq and Saudi Arabia to over six in the United States and Canada’s conventional oil reserves.
The capital cost of the equipment required to mine the sands and haul it to processing is a major consideration in starting production. The NEB estimates that capital costs raise the total cost of production to C to C per barrel for a new mining operation and C to C per barrel for a SAGD operation. This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs C to C per barrel for a new mining operation.
Therefore, although high crude prices make the cost of production very attractive, sudden drops in price leaves producers unable to recover their capital costslthough the companies are well financed and can tolerate long periods of low prices since the capital has already been spent and they can typically cover incremental operating costs.
However, the development of commercial production is made easier by the fact that exploration costs are very low. Such costs are a major factor when assessing the economics of drilling in a traditional oil field. The location of the oil deposits in the oil sands are well known, and an estimate of recovery costs can usually be made easily. There is not another region in the world with energy deposits of comparable magnitude
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