Canada to be among top three oil producers by 2030
By Yadullah Hussain, Financial Post
June 5, 2012
Canada could emerge as the top three or four oil producer in the world by 2030 thanks to rising oil sands supply, according to an industry forecast which focuses more on the possibilities that lay before the Canadian oil industry rather than its substantial challenges.
Raw bitumen production will dominate the ramp-up and is expected to more than triple to five million barrels per day by 2030 from 1.6 million bpd in 2011, making up for stagnating output from conventional plays, said Canadian Association of Petroleum Producers in its benchmark annual forecast published Tuesday.
The industry body attributed its bullish forecast to accelerated project time lines and the inclusion of new projects that are likely to proceed due to increased ‘industry confidence’ — a defiant tone, given the strong opposition the sector faces from environmental and aboriginal groups on a range of issues such as greenhouse gas emissions, land rights and air and water pollution.
CAPP’s 2012 forecast revises last year’s estimate of 3.7 million bpd of total output by 2025 to 4.2 million bpd. This year’s forecast is extended by five years and latest projections indicate a staggering 6.2 million bpd in total oil production by 2030.
CAPP expects output from conventional plays to rise to 1.6 million by 2020, only to scale back to their current levels of 1.1 million bpd by 2030.
“Resurging growth in Western Canadian conventional oil production and new oil sands investments are driving the positive outlook,” said Greg Stringham, the association’s vice-president, markets and oil sands. “Canadian oil is clearly on the global stage and this forecast growth will put Canada in the top three or four oil producers in the world.”
Canada recently surpassed Iran to become the world’s fifth largest crude producer after Russia, U.S., Saudi Arabia and China, according to recent data from the U.S. Department of Energy. While Canada could potentially surpass China’s four million bpd, it may be tough to eclipse the top three as each currently produce upwards of nine million bpd and have ambitious plan to scale up.
THE OTHER EAST
Meanwhile, CAPP expects Eastern Canada’s production to decline from 273,000 bpd last year to around 90,000-100,000 bpd by the end of the forecast period, but that presents an opportunity for Alberta producers.
“There is… much interest in improving connectivity to western Canadian supplies for all Canadians,” CAPP said in the report. “As such, a number of projects to increase pipeline access from western Canada to eastern Canadian markets are being contemplated.”
While Enbridge and TransCanada’s eastern pipeline adjustment plans face opposition, CAPP notes that CN Rail and Canadian Pacific’s ready infrastructure could ensure Western crude access to Eastern Canadian refineries.
And despite rising U.S. production, Canadian producers could continue to make a play for the American market by displacing Venezuelan and Mexican suppliers to the Gulf Coast.
“However, the flow of crude oil into this region currently far exceeds its ability to process it and there exists insufficient takeaway capacity to transport these growing supplies beyond the Cushing, Oklahoma pipeline and storage hub,” said CAPP, adding that refineries in California and Washington also present opportunities for producers.
Industry observers, however, have warned that price differentials between WTI and Western Canada Select and rising U.S. production are major threats to the oil sands.
“North Dakota’s Bakken play is competing directly with the oil sands and mounting downward pressure on Canadian crude prices, as pipelines and refineries in the Northern U.S. become increasingly congested,” according to energy consultant Wood Mackenzie in a report published Monday. “As a result, a number of future oil sands projects and phases become more prone to delay.”
Which is why market diversification will have to be a key strategy for producers going forward.
Asia remains a key destination for Canada, although the earliest that oil producers would be able to increase their market share in the continent is in 2017, ‘if’ a new pipeline project to the west coast is approved, notes CAPP, casting some doubt in an otherwise exceedingly optimistic forecast.
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