EDMONTON – With oil prices likely to remain low for some time, the departing chief of Alberta Investment Management Corp. (AIMCo) says itâ€™s time the province and oilsands producers got serious about cutting production costs.
â€œYou canâ€™t do it in 12 months. It will take two, three or four years, even if you work very hard,â€� says Leo de Bever, who steps down Dec. 31 after heading the $80-billion public sector pension fund manager since it was formed in 2008.
â€œYou could probably survive with the stuff thatâ€™s already operating because the marginal cost is still low enough. But for any new (oilsands) projects, I donâ€™t see anything making any sense if oil stays at $65 (U.S.) or $70 a barrel.â€�
West Texas Intermediate (WTI), the benchmark grade of U.S. light crude, sank to a low of less than $65 a barrel Monday, and is currently trading in the $68 range. Thatâ€™s roughly $40 below its June high.
Most analysts say prices are likely to remain depressed for months as global supplies exceed current demand by roughly two million barrels a day.
â€œThat doesnâ€™t help (Alberta) if you want to produce another million barrels a day. For that you need new technology,â€� says de Bever, who has pushed the provincial government to set up a fund to accelerate development of new energy technologies.
â€œMy sense is we have to move from being a relatively high-cost producer to at least average, and probably a below-average cost producer. I think if we set our minds to it we could probably get some of this online within three or four years.â€�
Last April, former Alberta Finance Minister Doug Horner authorized AIMCo to invest $500 million from the Alberta Heritage Savings Trust Fund on promising new technologies.
In July, the Financial Post reported that AIMCo was in talks to invest $250 million in a new joint venture with Calgary-based Emergex Capital, a startup fund headed by longtime venture capital guru Michael Brown.
But those plans appear to be in limbo now, as a new cabinet under new Alberta Premier Jim Prentice focuses on other priorities, including deficit reduction in an environment of shrinking energy revenues.
â€œTo bring this closer to home, I think our reaction ought to be if we donâ€™t hang together, weâ€™ll hang separately,â€� says de Bever. â€œWeâ€™ve got by on (strong) commodity prices for the last 20 years, but maybe we canâ€™t hope that that will keep working.â€�
AIMCo announced in late November that Kevin Uebelein will take over from de Bever on Jan. 5. De Bever says he will move to the Calgary area and will remain in Alberta after he exits AIMCo.
â€œThereâ€™s a lot of opportunity here and Iâ€™d like to be a part of it, but how and when and what is still to be determined.â€�