Crude oil production from Canada’s oil sands could rise by a million barrels from today’s average daily rate to as much as 4 million bpd in 2030 despite a slowdown in the annual growth rate, IHS Markit has forecast.
Most of the increase will come from projects that were only recently completed or are still in construction. About a quarter will come from projects that are currently put on hold.
World Oil quotes the market research firm’s VP and head of the Oil Sands Dialogue Kevin Birn as saying “Large scale oil sands projects take two, three, four or more years to be brought online and so the reality of a slower pace of investment and growth in the Canadian oil sands is taking shape. Yet, ironically the call on Canadian heavy sour crude oil—the principal export from the Canadian oil sands—has never been greater as the rapid deterioration of Venezuelan output tightens the supply of heavy sour crude globally.”
Despite having the highest breakeven price among sources of crude oil, at an average of US$83 per barrel, Canada’s oil sands production has been rising at a solid rate over the past decade despite the oil price collapse from 2014. Although the industry has yet to fully recover from the blow, production continues to rise.
This has, of course, led to other problems, the chief among them lack of pipeline capacity to move the higher output to export markets. As a consequence of this, the prices for Canadian heavy crudes fell significantly last year. Now they are on the mend, not just because of the mandatory production cuts that the previous Alberta government instituted, but also because of the steady demand for heavy crude globally amid tightening supply.
It is unfortunate that Canadian producers cannot reap the full benefits of this demand because of the pipeline bottlenecks. The latest blow in this respect was a court’s ruling against the Line 3 pipeline replacement project that will once again delay it.
By Irina Slav for Oilprice.com
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