In The Media

Canada’s oil sands output to grow despite record-low investment, export bottlenecks

by Henry Lazenby (feat. Kevin Birn)

Engineering News
February 16, 2018

Canada's oil sands output is expected to continue on its upwards trajectory despite investment in the sector lagging behind historical levels, a recent report has found.

Oil sands production in Canada's oil patch of Alberta is expected to grow through the next decade, albeit at a slower rate than in the past, new research by market analyst IHS Markit has found.

"Oil sands production is akin to baseload power generation, but for the oil market. Once operational, oil sands facilities are largely unresponsive to the oil price – with production neither ramping up nor ramping down materially. And since oil sands do not have to overcome production declines, every incremental investment in new capacity, no matter how small, can result in growth," IHS Markit executive director Kevin Birn said in a recent statement. He is responsible for heading the firm's oil sands dialogue initiative.

Entitled 'Scenarios for Future Growth, the Oil Sands Dialogue' report forecasts the outlook for oil sands investment and production growth across different price outlooks in the IHS Markit global energy scenarios.

The report found that upstream investment in new oil sands production capacity has fallen by two-thirds since the 2014 collapse of oil prices – from more than $30-billion then, to just more than $10-billion estimated for 2017 – and may fall further in 2018, before beginning to recover. Yet, oil sands output is still expected to grow in each of the IHS Markit scenarios.

The firm said Canadian oil sands production is expected to have topped 2.6-million barrels a day. Depending on the IHS Markit scenario and corresponding global oil price trajectory, oil sands output could rise by between 700 000 bbl/d and 1.4-million barrels a day by 2030, with nearly 400 000 bbl/d of growth in all cases coming from projects under construction today, or projects recently completed and ramping up, IHS found.

The report said that although costs having fallen significantly in the oil sands sector, it is the unique nature of oil sands production that makes a future without oil sands growth difficult to envision over the coming decade. It cited the lack of production declines – if existing oil sands facilities are maintained, their output levels do not decline – which is unique compared with other types of oil production globally, the analyst noted.

Despite the collapse of oil prices slowing investment, projects under development at the onset have continue to be completed and production growth has continued. However, the reduced investment will impact the rate of future growth, the report says. In all IHS Markit scenarios, the level and pace of future investment and growth in the oil sands is lower, compared with the decade preceding the oil price collapse.

"Growth in the Canadian oil sands will ultimately be a function of the future price of oil and the challenges that face the industry, but growth will also be different, driven forward through the optimisation and expansion of existing facilities, because they are lower cost and quicker to oil. A more consolidated industry has also emerged in the last few years, which means that even in much higher price scenarios, overall investment is likely to remain lower than in the past," Birn stated.

Meanwhile, Canada, which holds the third-largest oil reserves in the world after Venezuela and Saudi Arabia, is being held hostage by the British Columbia minority provincial government, who is trying everything in its power to stop a planned federal- and provincial-approved $7.4-billion project to expand an existing 50-year old crude pipeline to the West Coast dead in its tracks.

Canadian crude receives a steep discount for its oil products compared with the North American benchmark, the West Texas Intermediate, because it is expensive to produce and has to travel thousands of kilometres to the Mexican Gulf where North America's refineries are located. Faced with a brewing trade war with its neighbour south of the border, Canada desperately needs to access new developing markets in Asia, via its West Coast, to boost export income and provide a solid platform for future economic growth.

The war of competing ideologies has reached new levels in recent weeks, with Alberta banning all British Columbia-made wine imports until its neighbour relents on the pipeline expansion. 


Be the first to comment

Please check your e-mail for a link to activate your account.
SUBSCRIBE TO OUR NEWSLETTERS
 
SEARCH
PODCAST

An Update on the NAFTA Renegotiations

May 21, 2018


On today's Global Exchange Podcast, we touch base with CGAI's North American trade experts in light of a busy week on the NAFTA file in Washington. After months of hard-pressed negotiations, and 6 weeks of 'perpetual' discussions in Washington, the deal has reached its next turning point, with Congressional leadership signalling that they'd need a new deal by May 17th in order to have it passed before U.S. mid-term elections in the Fall. With no deal in sight, and the Congressional deadline now in the rear-view mirror, we sit down with Sarah Goldfeder, Laura Dawson, and Eric Miller to ask where we go from here.


IN THE MEDIA

No suitors emerge for pipeline project stake as Kinder Morgan deadline looms

by Dan Healing (feat. Dennis McConaghy), The Canadian Press, May 23, 2018

Iran Nuclear weapons deal: ticking time bomb

by Marc Montgomery (feat. Ferry de Kerckhove), Radio Canada International, May 23, 2018


LATEST TWEETS

HEAD OFFICE
Canadian Global Affairs Institute
Suite 1800, 421-7th Avenue SW
Calgary, Alberta, Canada T2P 4K9

 

OTTAWA OFFICE
Canadian Global Affairs Institute
8 York Street, 2nd Floor
Ottawa, Ontario, Canada K1N 5S6

 

Phone: (613) 288-2529
Email: contact@cgai.ca
Web: cgai.ca

 

Making sense of our complex world.
Déchiffrer la complexité de notre monde.

 

© 2002-2018 Canadian Global Affairs Institute
Charitable Registration No. 87982 7913 RR0001

 


Sign in with Facebook | Sign in with Twitter | Sign in with Email