Thailand's state-run oil company is reviving blueprints for a major oil sands project in the latest sign the industry is shedding caution after more than two years of contraction.
Global oil prices have fallen sharply in recent weeks as doubts grow over a proposed deal led by the Organization of Petroleum Exporting Countries to tackle a global glut. But some companies are resuscitating growth projects that in many cases won't produce any crude for years.
Thailand's PTT Exploration and Production Public Co. Ltd. has awarded a contract for early-stage engineering work on its proposed Mariana Thornbury oil sands project in northern Alberta to AMEC Foster Wheeler PLC, said an executive with the engineering giant.
The Thai company shelved the steam-driven project's first phase as oil prices fell. It is due to produce 22,000 barrels of oil a day, although a start date is not known. A spokesperson for the company did not respond to a request for comment Friday.
The decision to revive the initiative shows that enthusiasm for expansion, albeit tepid, is returning despite oil prices that remain well under levels analysts say are needed to justify brand new projects. Indeed, companies are seen as more likely to revisit mothballed plans where they have already spent a considerable amount of money.
Last week, Canadian Natural Resources Ltd. said it would restart activity at its Kirby North project, buoyed by cost savings and expected cash flow from its expanding Horizon bitumen mine.
The Calgary-based company had already sunk $700-million into the plan when it was put on ice last year. It pegs remaining costs at $650-million, $100-million less than original estimates, with initial production targeted for 2020.
Raymond James analyst Chris Cox said that he does expect to see more expansions, but he doesn't see the CNRL project on its own as an indication that industry spending is poised to snap back to precrash levels.
"Kirby North was already half complete when it was previously halted and almost all of the major long-lead-time items had already been purchased and in most cases, delivered. The incremental costs are low enough that the company can still proceed with development even at this juncture."
Major producers won't unveil budgets for next year for several weeks, with many waiting on the outcome of OPEC's Nov. 30 meeting in Vienna.
However, several companies have signalled they are planning modest or reduced capital programs for 2017 should prices stay below $50 (U.S.) a barrel. West Texas intermediate oil on Friday fell by 59 cents to $44.07 a barrel.
Cenovus Energy Inc. has said it would provide details on future investments when it announces its budget in December, including whether it will restart expansion at its flagship Christina Lake project.
Analysts say it benefits from being a so-called "brownfield development," meaning costs are substantially below the price tag of building new operations from scratch.
PTTEP had planned to start front-end engineering work for Mariana Thornbury in 2014. It acquired full control of the undeveloped lease from Norway's Statoil ASA when the two companies ended a multibillion-dollar joint venture.
A development proposal for the initial phase was submitted to provincial regulators in May, 2015. Last month, the Bangkok-based company said it was "reassessing the investment strategy going forward to reduce costs and mitigate development risks in response to the low-oil-price environment."
Even with cost savings, however, such projects require oil prices above $60 a barrel to break even, according to Edinburgh-based consultancy Wood Mackenzie.