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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2009

Vol. 14, No. 24 Week of June 14, 2009

Economic rollercoaster produces range of Canadian oil forecasts

Canadian oil production could rise by anywhere from more than 4 percent to 53 percent over the next 16 years based on a range of forecasts by the Canadian Association of Petroleum Producers that underscores the industry’s extreme volatility as it grapples with economic uncertainty.

In updating its crude oil forecast and market outlook for 2009-25, CAPP said its best case scenario, which assumes the current investment climate will improve over time, points to total volumes of 4.17 million barrels per day by 2025, up 1.45 million bpd from 2008.

CAPP’s more conservative outlook, which is limited to projects that are currently in production or under construction, results in an increase over 16 years of only 120,000 bpd to 2.84 million bpd.

The combined numbers incorporate conventional crude, Atlantic Canada offshore production and the oil sands.

Breaking out the oil sands, CAPP projects 2008 production of 1.2 million bpd could soar to 3.3 million bpd by 2025 under its “growth case,” or 2 million bpd under its “minimum potential growth” case.

The results are based on a CAPP survey of oil sands producers earlier this year to determine plans for production of both bitumen and upgraded crude.

Investment capital lacking

CAPP said the economic downturn and global financial crisis have “hindered the ability of companies to acquire investment capital,” while the lower growth in market demand is “also anticipated given the economic downturn and the fact that refinery conversions and expansions are proceeding at a slower pace.”

A year ago, CAPP forecast total Canadian production would reach 4.5 million bpd in 2050 under a “moderate case’ or 5 million bpd, applying a more aggressive outlook, with the oil sands reaching 3.5 million.

This year’s target for total crude production ranges from 3 million to 4 million bpd by 2020, with the oil sands spanning 2 million to 2.9 million bpd.

Total production by 2015 is forecast to range from 3 million to 3.3 million bpd, with the oil sands ranging from 1.9 million to 2.2 million bpd.

CAPP Vice President Greg Stringham said the forecast indicates that “even with delays due to current economic circumstances, oil sands production is expected to grow, although the pace of development has slowed.”

“Producers expect continued demand for the security of supply that crude oil from Canada provides to the North American energy market.”

Most N.A. demand flat

The report said that based on survey results the potential demand for Canadian crude oil in most major Canadian and U.S. markets is relatively flat, although the U.S. Midwest is expected to take more Western Canadian crude as a result of planned refinery expansions and conversions to process heavier crudes.

The U.S. Gulf Coast is given “significant” growth potential because of its large refining capacity and the ability of many refiners to process heavy crude.

CAPP said the steep decline in Mexican production and Venezuela’s shift to open up markets outside the United States “could make securing supply from Canada more attractive in the future.”

But the full potential of the Gulf Coast market “remains uncertain at this stage … given limited pipeline access” from Western Canada.

CAPP said major pipeline projects currently under construction will add more than 1 million bpd of capacity exiting Western Canada by the end of 2010, but adding another 1 million bpd is not expected to occur until 2016.

However, pipelines being built or before regulators will “provide excess capacity for a number of years and sufficient pipeline capacity available exiting Western Canada throughout the forecast period” to 2025.

—Gary Park






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