In Oil & Companies News 10/06/2015
The growth in Canada’s heavy and light oil production by 2030 has been revised down 1.1 million b/d, primarily due to the near 50% drop in global prices in the past several months, a senior official at the Canadian Association of Petroleum Producers said.
“Low prices seem to have taken a toll, and output by 2030 will now be 5.3 million b/d, compared with a forecast of 6.4 million b/d we made last June,” said Greg Stringham, CAPP’s vice president for oil sands and markets. “Over the shorter to medium term of five to 15 years, the pace of growth remains consistent. But then we see signs of a slowdown.”
His comments came after CAPP on Tuesday released its 2015 Crude Oil Forecast, Markets and Transportation annual report.
The most hit will be light oil producers in Alberta and Saskatchewan, several of whom have drilled wells but not completed them due to the current low prices and the unfavorable price differentials, Stringham said.
“They are under significant pressure to preserve their balance sheet and weather through the current low price environment,” he said.
Light oil output in Western Canada is forecast to decrease 26,000 b/d next year and stand at 747,000 b/d, compared with an anticipated 773,000 b/d in 2015 and 763,000 b/d in 2014, the CAPP report said.
OIL SANDS OUTPUT GROWTH
The scenario is different in the oil sands sector, Stringham said, where major producers like Imperial Oil, Cenovus, Suncor and Canadian Natural Resources are “feeding on existing production and relatively low operating cost.”
He did not disclose any statistics, but Paul Masschelin, Imperial’s senior vice president for finance and administration, said at an industry event in April that Imperial was maintaining a sustaining capital of C$5/barrel ($3.98/b) for the 40,000 b/d Nabiye oil sands project in Alberta.
“Those projects that were sanctioned prior to the oil price slump will still go ahead and we will see some C$23 billion of investments by the year end in Alberta’s oil sands sector,” Stringham said.
Oil sands production will grow an average 150,000-180,000 b/d annually for the next five years, the report said.
Output, which was 2.157 million b/d last year, is expected to rise to 2.286 million b/d in 2015 and reach 2.467 million b/d next year. By 2020, that figure will climb to 3.080 million b/d, it said.
NEW PIPELINE NEEDED BY 2018-2019
Development of infrastructure to obtain market access is a continuing concern, and there is a need for a new pipeline by 2018-2019 to sustain oil sands and light oil production in Western Canada, Stringham said.
“The in-service dates for many of the pipeline projects have already been delayed and the historical records of missing those deadlines are a cause of worry,” he said, noting that crude-by-rail shipments — which are already playing a “strategic” role in reaching out to “niche” markets in the US and Eastern Canada and fetching a higher premium — will play a bigger role.
“Rail is also playing the role of a fallback arrangement and filling the void,” Stringham said, adding in 2015 the expectation is for 200,000 b/d of Western Canadian crude to be shipped in rail cars, compared with 185,000 b/d last year.
That figure could rise to 200,000 b/d in 2016 and 350,000 b/d in 2017, he said.
Meanwhile, the highest demand in 2014 for Western Canadian crude in the US was for refineries in the Rockies at 247,000 b/d, followed by the US Gulf Coast at 235,000 b/d, the Midwest at 190,000 b/d and the East Coast at 166,000 b/d, the report said.
“California is emerging as a surprise, as refineries in the US West Coast are looking at sourcing Western Canadian crude that was mainly sent via rail last year,” Stringham said, without giving a figure.
Also last year, some refineries in the US Midwest that were more dependent on lighter crude grades shifted to heavy barrels from Western Canada, Stringham said.
“This was primarily due to the rail offloading facilities that came on stream [in the US Midwest] in 2014. We see this as an emerging trend,” he said.
