Oil sands riches slow to a trickle for state companies

Tuesday, October 20, 2009

From an article by Rick Barrett in the Milwaukee Journal Sentinel:

The global economic slowdown has caught up with the desolate oil sands region in northwest Canada, which has been sending a torrent of money flowing through Wisconsin.

Known for fostering a boomtown in Fort McMurray, Alberta, the region has seen roughly $90 billion worth of oil production projects deferred or canceled during the recession. The result has been a slowdown in sales for some Wisconsin manufacturers who supply equipment to the region, although existing oil sands projects are keeping some others as busy as ever.

Huge electric mining shovels, made in Milwaukee, have provided the muscle behind the Gold Rush-style boom as oil companies tap the riches of dirt containing a tarlike grade of petroleum.

Shovels and trucks still run day and night in vast open-pit mines that resemble an industrial version of the Grand Canyon. They're built to keep going even when the temperature falls to 40 degrees below zero and ground becomes as hard as concrete.

Most of the synthetic crude from the region is used to make gasoline, jet fuel or home heating oil. It flows through a network of pipelines to refineries across North America, including Wisconsin's only refinery, in Superior.

Wisconsin companies that have benefited from the oil sands include shovel builders Bucyrus International Inc. of South Milwaukee and P&H Mining Equipment Co. of Milwaukee, as well as Rockwell Automation Inc., Manitowoc Co. and Falk Corp.

When falling petroleum prices cooled off the Canadian oil sands boom, Manitowoc Co. felt it through fewer sales of construction cranes.

"It's pretty slow for us there now," company CEO Glen Tellock said last week. "There are a lot of projects that will go forward, but not at the pace people had anticipated."

Some oil sands expansions costing tens of billions of dollars came to an abrupt end when petroleum prices fell to $40 a barrel earlier this year - extracting oil from tar sands becomes profitable only above about $35 a barrel.