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Canada's oil sands production has come roaring back, and according to IHS Markit, output is returning to pre-pandemic levels after a particularly difficult year that involved not only the Covid-19 pandemic but also a major pipeline defeat in the Keystone XL cancellation.
Canada's oil sands production has now fully recovered, according to IHS Markit—and then some.
The pandemic has, however, dimmed the future prospects for the oilsands.
Canada's oil sands production should reach 3.6 million bpd in 2030, according to the latest IHS Markit forecast. This would be an increase of 650,000 bpd from 2021 levels, and 900,000 bpd up from 2020 levels.
This is lower than IHS Markit's previous forecast of 3.8 million bpd due to lingering effects from the pandemic and the nation's pipeline woes.
But things are looking up. The Candian benchmark, Western Candian Select (WCS) has risen from under $31 per barrel a year ago, to more than $58 per barrel today.
"Although oil prices have rebounded and even exceeded pre-pandemic levels, producers are prioritizing rebuilding their balance sheets, paying down debt and returning cash to shareholders," Kevin Birn, vice president and head of Canadian oil market at IHS Market, said, adding that "These trends, which will delay a rise in upstream spending in the oil sands, factored into the reduction in the IHS Markit long-term growth expectation."
Also factoring into the outlook for Canada's oilsands are the uncertainties surrounding the energy transition. Oil sands breakeven costs have fallen, but new oilsands projects come with longer lead times vs. U.S. shale projects. Combined with the greater expense for oil sands projects, the energy transition could help to stymie new projects to a greater degree than U.S. shale.
For this reason, according to IHS Markit, the focus will be on expanding and improving existing projects instead of sinking money into new ones.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.