The recent steep drop in crude oil prices isn't good news for Canada's oil-sands industry, which boasts large reserves but requires high up-front costs for development.

With oil futures prices dropping more than 30% since April from above $110 a barrel to below $80 a barrel Tuesday, profits will be squeezed at several projects and some under construction may be halted if they no longer make economic sense.

The Canadian oil-sands industry currently produces 1.6 million barrels a day and is set to add nearly another million barrels a day by the end of this decade, according to the Canadian Association of Petroleum Producers, an industry group.

Experts disagree on how low oil prices would have to drop before producers would have to cancel or delay projects under construction. It also depends on where each producer predicts oil prices will be in the future. Longer dated West Texas Intermediate oil futures, for example, still put the U.S. benchmark price close to $90 a barrel, showing the market still expects oil to rise over time.

Bob Dunbar, president of the Calgary consulting firm Strategy West Inc., has a more conservative outlook than most. He said new oil sands mining projects require long-term WTI prices between $90 to $100 a barrel, due in part to labor and material cost inflation as producers have crowded the field with new projects.

Though he said it is "probably a little bit premature" to say the recent drop in crude will halt the industry's growth, Dunbar expects some projects to be halted eventually.

"It's not reasonable that all of those projects are going to proceed anyway," Dunbar said. "There's more than the industry can sustain--we just don't have enough engineering or skilled labor."

Other analysts put the long-term WTI oil price for new mining projects lower, between $60 and $80 a barrel.

BMO Capital Markets analyst Randy Ollenberger sees new mining projects profitable at WTI prices of $70 a barrel and up, while Jackie Forrest, director of global oil research for the consulting firm IHS CERA sees them profitable at between $60 and $70 a barrel. Already built mining projects can turn a profit as low as $30 a barrel WTI, they said.

"I don't think anyone will be canceling projects yet," Ollenberger said, pointing to the higher price for longer-term oil futures, and his firm's average price WTI forecast for next year of $95 a barrel.

Forrest said new projects are still profitable. "They are going to be making less money than they were prior to the drop in oil prices," she said, "but the reality is these projects still make economic sense."

Companies pursuing oil sands mining project include Suncor Energy Inc. (SU, SU.T), Exxon Mobil Corp. (XOM)-controlled Imperial Oil Ltd. (IMO, IMO.T), Canadian Natural Resources Ltd. (CNQ, CNQ.T), Royal Dutch Shell (RDSA, RDSA.LN) and Total SA (TOT, FP.FR) are among the companies pursuing oil sands mining projects.

Mining projects make up about half of the expected production growth in the oil sands industry. The rest are underground steam-injection, or "SAGD" projects that require much lower prices to justify new projects, in the range of $45 to $70 a barrel, the analysts said. Most of the mining companies also have SAGD project, as well as companies including Cenovus Energy Inc. (CVE, CVE.T), Husky Energy Inc. (HUSKF, HSE.T), Nexen Inc. (NXY, NXY.T), MEG Energy Corp. (MEGEF, MEG.T) and Athabasca Oil Sands Corp. (ATHOF, ATH.T).

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com