Plunging crude prices hit Canada’s big oil dreams

October 24th, 2008 - 2:46 pm ICT by IANS  

Toronto, Oct 24 (IANS) Plunging oil prices and credit crunch have hit two of Canada’s largest-ever projects to recover crude from oil sands.With oil reserves of 179 billion barrels, mostly in oil sands of Alberta province, Canada meets most of the energy needs of the US. But with the crude needed to be above $85 for any returns for them, Canadian oil companies have decided to cut back on their two most costly oil projects ever.

Suncor Energy Inc. said Thursday it will reduce its spending by one-third in 2009 - which will delay its $20.6-billion Voyageur oil project in Alberta.

Petro-Canada-led consortium also announced that it is delaying building processing facilities for its $23.8-billion Fort Hills project.

With the central bank forecasting that Canada is on the verge of recession, the government Thursday announced guarantees for bank loans to consumers, home buyers and businesses.

Finance Minister Jim Flaherty announced the creation of the Canadian Lenders Assurance Facility to provide insurance on the wholesale term borrowing from banks.

“The government of Canada is acting today to ensure that financial institutions in this country are not put at a competitive disadvantage when raising funds in wholesale markets to lend to consumers and businesses,” he said.

Starting November, the temporary programme will last six months.

“Today’s announcement is an important part of Canada’s implementation of the recent G7 Plan of Action to stabilize financial markets, restore the flow of credit and support global economic growth,” the minister said.

In its quarterly report, the Bank of Canada also warned Thursday that Canada was on the edge of recession as plunging oil and commodity prices drag down its economy.

The country’s central bank said the Canadian economy will decline by 0.4 percent in the last quarter of 2008 and show zero growth in the first fiscal quarter of 2009.

The country’s gross domestic income will shrink by 1.9 percent next year, the bank said.

After bleeding for two days, the Toronto Stock Exchange made a late-day recovery of 94.50 points Thursday to close at 9,331.47.

The Canadian dollar, which had ended 79.70 cents US Wednesday, slipped further against the greenback, closing at 79.52 cents.

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