Canada needs to improve its competitiveness and get pipelines built if it wants to transport an additional 1.6 million barrels per day (bpd) of western Canadian production growth by 2035 to new emerging markets, the Canadian Association of Petroleum Producers (CAPP) announced in its 2018听Crude Oil Forecast, Markets and Transportation听report, released on June 12.
鈥淚t is difficult for Canadian producers to ensure fair market value for our natural resources without major pipelines or access to new, emerging markets in regions such as China, India and 小蓝视频east Asia,鈥� said CAPP president and CEO Tim McMillan.
鈥淐anada is falling behind its competitors, losing the opportunity to supply the world with oil produced the Canadian way. The U.S. is increasing its oil exports to the same emerging markets Canada is targeting.
鈥淚n 2014, production and capital investment was high in Canada鈥檚 oil industry. By removing regulatory barriers and increasing pipeline capacity, we can clear the path for a healthy energy sector and be successful once again.鈥�
An increasing competitiveness gap continues to impede Canada when it comes to attracting energy investment, according to CAPP. The country鈥檚 inability to get major pipelines built, and create and implement efficient regulatory policies 鈥� along with the cancellation of a series of projects such as Northern Gateway, Pacific NorthWest LNG, Energy East 鈥� has eroded investor confidence in Canada鈥檚 energy sector.听
Total Canadian oil production is expected to increase to 5.6 million barrels per day (bpd) by 2035 鈥� an increase of 1.4 million bpd compared to production in 2017. Bolstering the growth will be a rise in oil sands production to 4.2 million bpd from 2.65 million bpd 鈥� despite a decrease in oil sands鈥� capital spending for the fourth consecutive year.
鈥淐anadian production is forecast to rise to 5.6 million bpd and yet we do not have the means of getting it to new, global markets,鈥� McMillan said.
鈥淭he competition for capital investment in the global marketplace is fierce and Canada is losing. A lack of regulatory clarity, and the inability to see federally-approved pipelines get built, sends the signal that Canada is closed for business.鈥�
Western Canada accounts for about 95 per cent of the country鈥檚 total production, with conventional oil 鈥� including pentanes and condensates 鈥� representing more than one million bpd of the region鈥檚 total. Through to 2035 conventional production will remain largely flat 鈥� rising to 1.33 million bpd from 1.32 million bpd in 2017.听 The greatest potential for growth will be in the liquids-rich Montney and Duvernay formations, which are expected to contribute about 500,000 bpd of pentanes and condensates by 2026.
The report noted that in 2017, 94 per cent of the total 991,000 bpd of conventional crude produced in Western Canada came from Alberta and Saskatchewan. While Manitoba and British Columbia produced a small amount, the Northwest Territories saw its conventional production cease entirely in 2017.
The report noted, 鈥淐onventional crude oil production can respond more quickly to changes in crude oil prices than oil sands production given the smaller scale of these developments. With WTI oil prices averaging over US$60 so far in 2018, conventional oil drilling is expected to be similar in 2018 compared to 2017. However, it is unlikely that increased drilling will return to the highs of 2014.
鈥淎fter the higher quality reserves are developed first, producers will move towards developing the less prolific plays, which should dampen growth in production in the longer-term. Total conventional oil production falls to 927,000 bpd by 2035, declining one per cent year-over-year from 2023 to the end of the outlook. Production could be higher than forecast with improved economics.鈥�
In Eastern Canada, oil production will rise to 290,000 bpd by 2025 from major offshore projects including Hebron, Hibernia, Terra Nova, and White Rose. Hebron will account for the bulk of the production highs between now and 2025 as the region鈥檚 newest producing project ramps up. Beyond 2025, production will drop to 70,000 bpd by 2035.
Canadian oil producers continue to face pipeline constraints as federally-approved projects such as Kinder Morgan鈥檚 Trans Mountain expansion pipeline, Enbridge鈥檚 Line 3, and TransCanada鈥檚 Keystone XL have yet to begin construction. In 2017, Canada鈥檚 oil supply 鈥� comprised of oil production and diluent 鈥� was 4.2 million bpd, exceeding existing available pipeline capacity. CAPP forecasts oil supply will rise another two million bpd to 6.2 million bpd by 2035.
Meanwhile, the United States continues to aggressively streamline and reduce the costs associated with its regulations. Capital spending in the U.S. rose 38 per cent to $120 billion in 2017 while investment in Canada fell to $45 billion.听
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