The oil sands are a $1.4-trillion bonanza, according to a study that forecasts the economic impact generated by the world's second-largest deposit of crude in the 2000-2020 period.
And that conclusion is based on prices of just $40 (U.S.) a barrel of synthetic crude, the type pumped out of northern Alberta, roughly the same quality as West Texas intermediate, which traded at almost $67 Thursday.
Some of the benefits will be spread outside of Alberta, especially in the areas of government revenue and employment. the study says.
But based solely on gross domestic product generated by oil sands activity and expansion, Canada's richest province is the jurisdiction that will grab most of the riches springing from the gooey black mud surrounding Fort McMurray, it says.
The study, released Thursday, is the result of work conducted by the Calgary-based Canadian Energy Research Institute, a 30-year-old group that was formed to analyze energy economics and that describes itself as independent and non-profit.
While the figure of $1.4-trillion (Canadian) is a higher-end estimate of GDP resulting from the oil sands, the institute focused its report on an $885-billion GDP figure, based on a synthetic crude oil price of $32 (U.S.) a barrel.
Of the $885-billion (Canadian), about 70 per cent would stay in Alberta, the study says. About 10 per cent of that would benefit Ontario and about 10 per cent would trickle out to other countries.
In sum, the oil sands could represent about 3 per cent of Canada's GDP in 2020, up from about 1.5 per cent in 2000.
All of this money stems from an estimated investment of $100-billion over 20 years in building oil sands projects, such as the $11-billion that Canadian Natural Resources Ltd. is putting into the construction of what it calls Horizon.
On other measures, Canadians in general will see some dollars in their pockets, contrary to the prevailing view in the country that the oil sands boom helps only three million or so Albertans and hurts the other 27 million people outside the western province who must cope with high oil prices.
In terms of jobs, Alberta could have 3.6 million person years or 56 per cent of the work that is predicted, compared with one million person years or 16 per cent for Ontario. Outside Canada, there could be another 1.1 million person years of labour.
“The dollars are spent here in Alberta but the employment benefits are spread across the country, primarily in Ontario,” said Greg Stringham, a vice-president at the Canadian Association of Petroleum Producers, an energy industry lobbyist. “The benefits and expenditures are spread all the way across the country.”
In terms of government revenue, it is in fact Ottawa and not Edmonton that looks to rake in the most. Alberta's main cash flow will be from royalties, as the underlying resource is owned by the province, but looking at taxes, the federal government's coffers is the place that could be pelted with a gusher of petrodollars.
The report suggests that of $123-billion in expected government revenue, Ottawa is set to reap the biggest share, $51-billion or 41 per cent
“The federal government is doing very well out of this,” Mr. Stringham said.
However, Ottawa is followed closely by Alberta, at $44-billion or 36 per cent, meaning a single province essentially stands side-by-side with the federal government.
The other nine provinces and three territories look to pick up $12-billion from various taxes, or 9 per cent of the total revenue, the study says. That's less what cities, mostly in Alberta, could expect — a take estimated at $17-billion or 14 per cent of the total, generated solely by property taxes.
Most of the oil sands activity outside Alberta is represented by manufacturing in Ontario. Suncor Energy Inc., for instance, has more than 500 contractors in Eastern Canada, including General Motors of Canada Ltd., which provides fleets of pickup trucks. GM Canada does the same for Syncrude Canada Ltd.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.