Alberta does not have 168 billion barrels of oil reserves. The real number is likely only 1/7th. Yes, 85% of Alberta's reserves are vapourware. A for non-energy experts.

First of all, what's a reserve? It's an amount of oil that can be economically recovered at some price. So a reserve has (1) an amount, (2) a cost, and (3) a price expectation. Non-energy people get very confused by this, because a reserve is not "oil in the ground." /2

A reserve is instead analogous to an oil-making machine sitting in a factory. You don't think of a bottling line in terms of "oh my God we're running out of bottling lines," or "there's too dang many bottling lines!" A reserve is simply an economic asset. /3

And economic assets create cash flow. If assets don't create cash flow, then they are not assets. Full stop. Now, reserve categories exist to communicate the relative probabilities of turning the asset into cash flow - proved, PUD, etc. That's not what this thread is about. /4

Instead, this thread is about the 168 billion barrels that Alberta allegedly has. The number hasn't been updated since 2015. Remember what I said about reserves? Amount, cost, price. Anything change in price expectations since 2015? Anyone? /5

It's simply unreasonable that the cash flow production potential of Alberta oil resource hasn't changed since 2015. I haven't covered oil sands in years, but in 2015 a $40 WTI price meant zero margin. About the same now, I think. $MEG is a lean, single asset operator. /6

Note the pre-hedge netback of -$7.78 in 2Q20. WTI was US$27/bbl. So that's a cash margin breakeven of ~US$32/bbl. At WTI oil prices < US$32/bbl, the best SAGD oil sands is cash flow negative. But! That doesn't include initial, upfront capital development cost!!! /7

Which is relevant because only 24 billion bbl of Alberta's oil sands resources were under active development in 2015 (the last year of data, remember). The upfront capital is risky, pays out over decades. Add a bit more for normal heavy/light oil diffs (don't ask)... /8

... and prob you need US$55 WTI to make a new SAGD investment. Mining? Ha ha ha ha. Forget it. Kearl broke even at $104/bbl (2013 calc). And, the resource quality we know now is worse than we thought it was (the nature of learning... the more you learn, the dumber you get). /9

To a first order approximation, the amount of oil sands resource truly left to be developed is zero. Zero. Zero. Even if climate change is a hoax. (It's not). Even if Keystone XL is built. (It won't be). /10

The culprit is fracking. In 2016, I was on the team that calculate 3x more resource in the Midland basin than in the oil sands at ANY price deck below US$95. Midland has its own capital efficiency problems, so number today would be less than 3x. But the point remains! /11

168 billion barrels at $40 WTI is a fantasy. Need to let go of this. Investment is not coming back. Those good jobs are not coming back. Sinking $26 billion into bitumen refineries will not bring them back. https://www.cbc.ca/news/canada/calgary/alberta-bitumen-sturgeon-refinery-nwrp-1.5718044