Canadian Oil Sands spending pegged at $1.3 billion
Canadian Oil Sands spending pegged at $1.3 billion
Canadian Oil Sands, which announced a C$1.3 billion ($1.3 billion) 2013 capital spending budget late Thursday, expects its product to fetch $5 a barrel less on average than the US oil benchmark, West Texas Intermediate, next year.
The differential varies widely. In 2011, synthetic fetched a premium to WTI of $8.27 a barrel on average, and in 2012, it has sold for an average discount of $1.38 a barrel, according to Shorcan Energy Brokers.
Syncrude, a joint venture of international oil companies, produces light crude processed from the oil sands, which has similar characteristics to the oil produced in fast-growing volumes in the Bakken region of North Dakota using horizontal drilling and hydraulic fracturing techniques.
The International Energy Agency recently singled out the Bakken as one of the main drivers of its forecast for the US to overtake Saudi Arabia and Russia as the world’s top oil producer by 2017.
“Refineries are looking to accept this oil. It’s easier to process. I think that’s clear,” CEO Marcel Coutu told analysts. “So I think that we will continue to have a discount for light product, which ours is one of, and we will find refineries that will take our product.”
The crudes compete for pipeline capacity to US Midwest refineries and surging output has spawned a major expansion of rail capacity as new pipelines to move the surging volumes are slow to get built.
In early November, Suncor Energy Inc. said rising light oil production threatened the profitability of a planned 200,000 barrel a day oil sands upgrading facility called Voyageur.
Suncor is also a partner in Syncrude, which has a capacity of 350,000 barrels a day. Last year, the Syncrude partners pushed back some of their large expansion plans, partly to iron out reliability issues that had led to unplanned outages.
Canadian Oil Sands has a 37 percent stake in the project, located north of Fort McMurray, Alberta.
About 63 percent, or C$836 million, of its 2013 budget will be invested in projects to replace or relocate mining infrastructure and to develop facilities to reclaim tailings, a by-product of the mining process. The rest will be spent on regular maintenance, the company said in a statement.
It will spend C$393 million on maintenance, including a planned outage of one of its upgrading units in the second half of 2013.
Canadian Oil Sands said it expects Syncrude to produce 105 million to 115 million barrels in 2013, or about 301,000 barrels a day at the midpoint. That represents an increase of about 3 percent from estimated 2012 volumes.
Costs per barrel are expected to be C$36.67, about 3 percent lower than this year.
The company intends to maintain its quarterly dividend of 35 Canadian cents a share through 2013, the CEO said.
Cash flow, which gives a glimpse into the company’s ability to fund development and pay out dividends, is estimated at C$1.04 billion, or C$2.16 a share, for 2013, the company said.
“Given COS’s strong balance sheet, we believe the company is capable of managing the dividend while funding its major project spending over the next couple of years,” National Bank Financial analyst Kyle Preston said in research note. “Following the completion of these projects, we expect the company will have a much more balanced payout profile going forward.”
Shares of Canadian Oil Sands, which has a market value of C$9.91 billion, were off 13 Canadian cents at C$20.30 on the Toronto Stock Exchange. They have fallen 15 percent so far this year.
Syncrude’s other partners are Imperial Oil Ltd, Nexen Inc, Sinopec, JX Holdings Inc’s Mocal Energy and Murphy Oil Corp.
Pace of Saudi Arabia’s private sector sell-off accelerates
- Aim is to increase the private sector contribution to gross domestic product from 40 percent to 65 percent by 2030
- The NCP said that the privatization program would save the government around SR35 billion.
DUBAI: Saudi Arabia’s ports, hospitals, desalination plants, schools, and even its sports clubs, are among the candidates for early transfer to the private sector in a program that the government hopes will generate up to SR40 billion ($10.6 billion) in revenue over the next two years.
The National Center for Privatization (NCP), the body responsible for implementing the big state sell-off program, released details of its privatization plan after the Council of Economic and Development Affairs, chaired by Crown Prince Mohammed bin Salman, approved the proposals to increase private sector involvement in the economy — a vital part of the Vision 2030 strategy to reduce oil dependency.
The aim is to increase the private sector contribution to gross domestic product from 40 percent to 65 percent by 2030.
The NCP said that the privatization program would save the government around SR35 billion, add SR14 billion to gross domestic product, and generate up to 12,000 new private sector jobs in the Kingdom by 2020 — the initial phase of the sell-off.
“The scale is very realistic given that privatization is a complex and time-consuming process from a host of perspectives, including regulatory, governance and legal,” said John Sfakianakis, director of economic research at the Saudi Arabia-based Gulf Research Center.
“The estimated amount is equally pragmatic at this stage. These numbers change both due to valuations and appetite as well as economic conditioning with time.”
Other parts of the national economy are also earmarked for some form of privatization under the Delivery Plan 2020. Transport, the renewable energy industry and flour mills are all scheduled in an NCP report that lays out the structure and conditions of the state sell-off program.
“The most important characteristic is the commitment to push ahead with privatization as well as do it in a phased way over the next few years that involves a number of different sectors. There is an evolutionary phase to any privatization process that involves multiple phases over time,” said Sfakianakis.
The King Faisal Specialist Hospital and Research Center, the Riyadh facility regarded as the jewel in the crown of Saudi medical facilities, is named as a subject for incorporation as a prelude to becoming a non-profit organization “to become financially independent and a role model in the health sector and help in achieving its leadership position through focusing on innovation.”
- The National Center for Privatization hopes the 2020 privatization program will contribute SR13-14 billion to Saudi Arabia’s GDP.
- Total government proceeds from asset asset sales will total between SR 35 billion.
- Net savings (capex and open) from privatization and PPP projects are forecast to be SR25-33 billion.
- Between 10-12,000 new private sector jobs will be created.
- The privatization program aims to enhance competitiveness, and improve the Kingdom’s business environment through privatizing government services.
Other hospitals will be privatized by the handing over of medical facilities to private operators and the creation of new medical cities, as well as primary care facilities, the provision of rehabilitation services, radiology and laboratory
In a statement, Turki Al-Hokail, chief executive of the NCP, identified other sectors that would be the focus of the privatization plan, including agriculture, housing, energy and Hajj and Umrah services.
“The privatization program aims to enhance competitiveness, elevate the quality of service and economic development, and improve the business environment through privatizing government services,” he said.
The privatization program has been an element of the Vision 2030 strategy since it was launched two years ago, but the latest document sets out a firmer timetable for the sell-off. It identifies “game changers” — businesses that will “receive special attention from the leadership to ensure their successful completion.”
The first three “game changers” are Saudi Arabian ports, the Saline Water Conversion Company at Das Al-Khair and what the NCP calls “opportunity explorers” — structures aimed at facilitating partnership opportunities between the public and private sectors.
The NCP makes clear it is keeping its options open in choosing what kind of privatization is appropriate for a sector: “Full or partial asset sale, initial public offering, management buy-out, concessions or outsourcing” are all under consideration.
Some 100-plus privatization initiatives have been identified across 10 ministries, of which some (including sports clubs, grain silos and desalination) are expected to be completed by 2020.
Jason Tuvey, Middle East economist at Capital Economics, said that the estimate of selloffs were lower than what was possible given the “vast number” of companies that the Saudi state wholly owns or has a controlling stake in.
“Excluding the Aramco IPO, we’ve previously estimated that the government could raise around $25-50 billion from privatizations,” he told Arab News.
The document also makes clear that foreign participation will be allowed in some parts of the program.
The NCP program does not include any assets owned by the Public Investment Fund, the body which is intended to become the world’s largest sovereign wealth fund with assets of $2 trillion by 2030 and which will retain the right to sell the assets it owns in partnership with the government.
The NCP program also does not include residential real estate assets which are unlocked for private sector usage by contractors and real estate developers, and which are covered by the national housing program.
Ministers have said that the overall privatization program could raise as much as $200 billion in sell-of proceeds in the years running up to 2030, but there is no certainty as to how that figure will be reached. In Riyadh last week government officials gave a more conservative estimate of between $50 and $60 billion.
The plan also makes it clear that there is still work to do on the legislative and regulatory framework within which privatization will be pursued. The first of the three “strategic pillars” of the Delivery Plan is the creation of such structures “to enable privatization processes and governance by setting clear and specific procedures that increase the level of preparation and execution of privatization.” Key initiatives remain to be fulfilled in this respect, the document says.
Al-Hokail added: “The privatization program is in the interests of Saudi citizens, will bring many benefits, and improve the investment climate. The program’s strong governance foundation will be a strong pull factor for global investors and large corporations because it sets the guidelines that will make the program attractive.”