Oilsands spending on construction will continue unabated despite a dip in crude prices, surpassing $18.5 billion within the next two years, according to a new report.

The massive outlay of capital reflects in part producers spending more time finishing engineering plans before starting construction, moving some project timelines' slightly back, said AltaCorp Capital in an industry update Monday.

"Producers are more cautious in terms of releasing the work, and making sure the companies are not running into the same inflationary environment as 2005-2008 when a bunch of projects were released at the same time," said Maxim Sytchev, AltaCorp managing director.

"Right now it appears to be a more controlled environment, so people at least know what they are building, it's more manageable."

Investment in Alberta's oilsands plummeted along with the price of crude oil in 2009, falling to $11 billion from an estimated $18 billion.

In the firm's third annual survey of companies involved in the oilsands, Sytchev forecast oilsands spending to hit $15 billion this year, rising to $17 billion next year, based primarily on restrictions due to a tight labour force rather than softer commodity prices.

Crude oil fell to a low of $75.67 US per barrel at the beginning of October, from highs of $113.93 in April.

The commodity settled at $86.25 US Monday in New York.

This year's slide in oil prices likely won't put projects on hold as producers instituted cost control measures to keep budget overruns in check, he said.

However, further deterioration in prices would likely undermine economics of larger projects, which require a $40 to $50 US per barrel oil price level, the report said. Smaller players will require a $65 to $70 per barrel level for project economics to work.

"You would have to see fairly significant decline in oil prices on a sustained basis for companies to really pull back the reins," said Jared Dviuba, with BMO Capital Markets.

"A lot of the smaller companies might see their projects delayed or pushed back a bit because there is more of an issue around financing, but for the majority of projects driven by large players such as Suncor, Cenovus and MEG, you'd have to see prices fall well below $70 before you saw significant pullback in spending," said Dviuba.

Activity in Alberta's oilsands ramped up this year after stagnating on the recession and tight credit markets, with analysts predicting a whopping $180 billion investment in the resource over the next decade. However, it was only around November that industry started seeing a strong turnaround in oilsands activity, boding well for 2011, said Kevin O'Brien, president of IMV Projects.

The engineering, procurement, construction management company increased its payroll by 50 per cent this year to 750 staff to meet demand for its services.

O'Brien said: "2011 has exceeded our expectations for what we thought the industry and our company would do this year. We're on track with a lot of ramping up. But we're not the only ones. . . . There's a lot of engineering work being done, and a lot more to be done."

Companies are taking on projects in smaller bits that are easier to control, such as thermal projects being forwarded in 30,000 to 40,000 barrel expansions at a time, he noted. The construction boom will follow the engineering boom next year, he said.

Oilsands companies have been cautious in awarding contracts because of the economic slowdown of 2010, said Bill Lingard, president of Flint Energy Services.

The company recently was awarded a $430-million contract on a steam assisted gravity drainage project in Wood Buffalo, and has 700 job openings.

"We thought that the construction of that was going to be awarded nine or 10 months ahead of when it was awarded," Lingard said. "Definitely people took their time to complete engineering and knew exactly what the spending would be and what they wanted to do."

He agreed with AltaCorp's spending forecast for 2012, lower than the Canadian Association of Petroleum Producers' outlook of $19 billion in spending this year and BMO's $21-billion forecast.

"The reason I know that can't happen is there are many constraints on human resources," Lingard said. "There's just not enough project execution, construction management, skilled supervision and skilled labour to go that fast."

domeara@calgaryherald.com