LNG Projects Will Help Boost Canada’s Ultra Light Oil Production

If liquefied natural gas (LNG) projects come on line in British Columbia by 2025, they will also help boost Canada’s production of condensate—the ultralight oil extracted with natural gas—and the country’s conventional crude oil and condensate production could reach 1.85 million bpd in 2025, just below the 1.86 million bpd record from 2014.

The 1.85-million-bpd production forecast would be 23 percent higher than the production of conventional crude oil and condensate in 2017, according to Bloomberg calculations based on the latest report by the Canadian Energy Research Institute (CERI), which does not include oil sands production and forecasts.

For crude oil, after a sharp decline in production between 2014 and 2016 by 8.4 percent, conventional oil production began to rise last year in response to increasing oil prices, CERI said in its report. Conventional oil production including pentanes plus in Canada in 2017 was 1.52 million bpd, led by Alberta at 690,000 bpd, Saskatchewan with 490,000 bpd, and 220,000 bpd from offshore in Newfoundland and Labrador.

In 2038, total conventional crude oil production will be just above 1.3 million bpd. In a scenario with LNG plants, total conventional oil production with pentanes plus and condensate in Canada will increase to 1.76 million bpd in 2038, up by 15.7 percent from 2017, CERI said in its report. Of the expected 2038 production with LNG, 1.332 million bpd will be conventional crude oil and another 433,829 bpd will be condensates. Without LNG, condensate production in 2038 is expected to be 370,133 bpd, according to CERI’s production forecasts.

“For the scenario with new LNG plants, on the other hand, the condensate production continuously increases as the drilling for natural gas for LNG plants is assumed to include NGL-rich areas,” said the report, adding that “Condensate production in British Columbia will double if new LNG plants are built.”

In the west, two large projects with a total initial capacity of 3 bcf/d (LNG Canada and Kitimat LNG) have advanced in the regulatory approvals process. LNG Canada is expected to make a final investment decision (FID) this year.

Regardless of the rise in condensate with LNG plants, “Production levels are not expected to reach the highs seen in 2014 before the decline in oil price,” CERI said.

“Total production will experience an increase until 2025 and then remain stable through the study period, with a slight growth in western Canada being offset by the declines in offshore Newfoundland and Labrador.”

By Tsvetana Paraskova for Oilprice.com

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