$28 Billion Reduction in Oil Sands NPV Forecasted Under Carney-Smith MOU

The Carney-Smith MOU Implementation Agreement (IA) is projected to knock approximately $28 billion off the net present value (NPV) of oil sands projects between 2027 and 2040, according to new modeling. This estimate aligns with recent comments from Cenovus CEO Jon McKenzie, who suggested that the Carney-Smith carbon tax will make some projects uneconomic and unfinanceable.

The $28 billion reduction in oil sands NPV seems to confirm earlier estimates that the Carney-Smith MOU IA would add $33 billion in cumulative carbon costs on the oil sands sector between 2030 and 2040. The additional costs from the higher industrial carbon price are estimated to be between 80 cents to $1.10 per barrel, depending on the project.

Assuming the application of a $140 per tonne effective Alberta carbon tax by 2040, the West Coast Oil Pipeline (WCOP) will require about $150 billion in supporting new investment in the oil sands sector over the next decade. This includes maintenance and sustaining capital, optimization, and expansions.

Given current uncertainty in federal and provincial policies and regulations, it's unlikely that the private sector will fork out this full price tag. In fact, Alberta taxpayers could be required to 'pony up' more financial support to effectively de-risk projects.