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Japan Canada Oil Sands president Satoshi Abe says 'Canada itself creates significant barriers to new investment' in Alberta's oil sands.

Larry MacDougal/The Canadian Press

When it comes to talking about how the northern Alberta oil sands have lost their lustre for foreign investors, Satoshi Abe sounds a lot like his Canadian counterparts.

“I think Canada itself creates significant barriers to new investment,” said the president of Japan Canada Oil Sands Ltd. (JACOS) reached at his Calgary office.

“Additional investment in Canada will only become attractive once there is sufficient egress of its resources and more certainty around its regulatory processes, which we are clearly lacking.”

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The foreign content of the Alberta oil sands has been thinned over the past four years, but not eliminated.

Oil sands output attributable to non-Canadian companies rose from about 320,000 barrels a day in 2010 to 647,000 b/d in 2014, then slipped back to about 573,000 b/d in 2018, according to a Canadian Press analysis of Alberta Energy Regulator production numbers.

The foreign working interest percentage varied from 22 per cent of total oil sands production of 1.44 million b/d in 2010, to just under 33 per cent of 1.98 million b/d in 2014, and about 20 per cent of 2.9 million b/d in 2018.

The decision by Oklahoma-based Devon Energy Corp. to sell its Jackfish thermal oil sands project (2018 output of 100,000 b/d) to Calgary-based Canadian Natural Resources Ltd. earlier this year drops that percentage to roughly 16 per cent.

While European and American companies such as Royal Dutch Shell, Statoil (now Equinor), Total, ConocoPhillips, Marathon Oil and Murphy Oil have been backing away from their oil sands exposure, Tokyo-based JACOS has been raising its bets.

It was part of a group of companies conducting oil sands extraction experiments starting in 1978, more than 40 years ago.

It opened a small-scale thermal pilot project in 1999 and produced a cumulative total of 35 million barrels of bitumen by 2015, when it was shut down as a precaution during the wildfires that destroyed parts of Fort McMurray.

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Instead of restarting the pilot, the company elected to go ahead with its long-planned $1.8-billion, 20,000-barrel-a-day Hangingstone expansion project, which began producing in 2017.

Better-than-expected results from its wells, where steam is employed to thin the sticky bitumen before it is pumped to surface, have boosted production to well above design, at about 29,000 b/d, Mr. Abe reported.

The 12 foreign companies left with commercial oil sands production in Alberta now are composed of three from the U.S. (ConocoPhillips, Exxon Mobil, Chevron), three from China (CNOOC or China National Offshore Oil Corp., PetroChina, Sinopec), and one each from Britain (BP), the Netherlands (Shell), France (Total SA), Hong Kong (Sunshine Oilsands), Japan (JACOS) and South Korea (Harvest Operations).

The Canadian Press foreign production analysis found the non-Canadian company with the highest oil sands production in 2018 was one of its most reluctant participants, Paris-based Total.

When the French firm announced a deal last year to sell its undeveloped Joslyn oil sands mining project to Canadian Natural, CEO Patrick Pouyanne made it clear oil sands were not the high priority they once were.

“Reducing our exposure to Canada’s oil sands by selling this asset is in line with our global strategy to focus our oil investments on low-break-even resources and develop a resilient portfolio in the mid and long term,” he said in a news release.

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He added the same rationale was used in cutting its stake in the Suncor Energy Inc.-led Fort Hills oil sands mining project to 24.6 per cent from 29.2 per cent in 2017.

Devon Energy sold its Jackfish thermal oil sands project to Canadian Natural Resources earlier this year.

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Still, Total’s share of Alberta oil sands production in 2018 was higher than any other foreign company at an average of about 101,000 b/d – 32,000 b/d from Fort Hills and nearly 69,000 b/d from its 50 per cent stake in the Surmont thermal project operated by its partner, Houston-based ConocoPhillips.

The next largest foreign oil sands owner is CNOOC, which picked up a 25 per cent interest in the JACOS assets, a 7.2 per cent interest in the Syncrude oil sands mine and ownership of the Long Lake thermal project when it bought Calgary’s Nexen Energy for $15.1-billion in 2013.

It produced about 71,000 b/d in 2018, little changed from 66,800 b/d in 2014.

Next is ConocoPhillips at 69,000 b/d, and then Exxon Mobil with 65,000 b/d from its 29 per cent stake in the Kearl oil sands mine operated by its Canadian subsidiary, Imperial Oil Ltd.

A buoyant global oil market and an attractive resource with pipeline room and clear regulatory paths brought foreign players to Canada’s oil sands a decade ago, says oil sands analyst Michael Dunn of GMP FirstEnergy.

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The reversal of all of those factors is responsible for sending them away.

“In the oil sands, experience and scale account for so much and if it’s not a growth area for you, if you’re not committed to it, a lot of these entities have decided their efforts and time are better served elsewhere.”

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