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PART ONE OF BNN'S WEEK LONG SPECIAL COVERAGE: CANADA'S NEW ENERGY
Fort McMurray has fallen.
The city itself – technically the Regional Municipality of Wood Buffalo – will soldier on. There might even be a modest recovery in the oil sands boomtown if the price of crude oil heads significantly higher and stays there.
Canada’s dream, however, of counting on the northern Alberta community of roughly 70,000 people to propel our country to energy superpower status is over. Barely a year ago, the local population was expected to balloon past a quarter million within the next couple of decades, with oil sands producers investing hundreds of billions of dollars in new projects and creating tens of thousands of jobs for the next generations of Canadians.
That was before the price of oil crashed.
Chris Cox, senior oil and gas analyst for Raymond James, notes any new oil sands projects will need at least US$70 per barrel to justify the costs of construction. The International Energy Agency expects prices will recover, eventually getting back to the US$80 per barrel level, but the Paris-based IEA says that will take until around 2020 to happen.
Goldman Sachs, meanwhile, is far less optimistic; the Wall Street giant is using US$50 per barrel for its long-term oil price assumption.
As a result of this, rather than continuing to expand at breakneck speeds, Fort McMurray is on its way to becoming “a shadow of its former self,” Cox said.
Fort McMurray’s fortunes have changed from boom to bust before, but this time it has left the rest of the country hanging in the balance.
Canada’s new energy reality raises several questions critical to ensuring our country’s long-term prosperity: Can the oil sands business innovate enough to survive, and possibly even thrive, in this new lower-for-longer environment? What happens to the local real estate market? How are the city’s most vulnerable residents dealing with the dramatic decline in opportunities? What might Fort McMurray look like in the post-oil sands era? And perhaps most importantly: Where will Canada’s future economic growth come from, if not from the oil sands?
Join Business News Network for a week of special coverage starting Monday, November 16 as we seek answers.