(Corrects cash flow decrease to $23 billion from $21 billion inheadline, first and fourth paragraphs after Wood Mackenzierevised figures)
CALGARY, Alberta, Feb 24 (Reuters) - Oil sands cash flowswill fall by $23 billion in the next two years, energyconsultancy Wood Mackenzie said in a report on Tuesday, as lowglobal petroleum prices make it less economical to extractbitumen from northern Alberta.
Canada's oil sands hold the world's third-largest provencrude reserves after Saudi Arabia and Venezuela, but operatingcosts are among the highest globally, according to WoodMackenzie principal analyst Callan McMahon.
Current operating costs reach $37 per barrel for thermalprojects, in which steam is pumped underground to liquefy tarrybitumen so it can flow, and $40 per barrel for mining projects.
With benchmark U.S. crude trading around $50 abarrel, down from more than $100 in June, McMahon said the oilsands region's cash flows would drop by $23 billion in 2015 and2016 combined.
Producers including Suncor Energy Inc, CenovusEnergy Inc and MEG Energy have slashed 2015capital expenditures in response to the oil price slump.
Wood Mackenzie estimates industry spending will drop by $1.5billion over the next two years, down 4 percent from itsfourth-quarter 2014 assumptions.
Even so, the consultancy forecasts only limited effects onproduction until 2017.
McMahon said production was unlikely to be shut in even ifprojects temporarily operate at a loss, while new ones scheduledto start up this year will go ahead because the investment hasalready been made.
"With the costs sunk, projects totalling 458,000 bpd ofbitumen are set to start production in 2015-2016," McMahon said.
Wood Mackenzie previously forecast peak bitumen productionof 4 million barrels per day from the oil sands in 2020 but hasnow pushed that back to 2024.
On Monday, Royal Dutch Shell Plc said it wasshelving plans to build the 200,000-bpd Pierre River oil sandsmine in northern Alberta, the largest such project to bedeferred.
Total SA and Statoil ASA also recentlypostponed big oil sands projects due to weak prices. (Reporting by Nia Williams; Editing by Lisa Von Ahn)
