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Chinese investment key to Canadian oil
Gary Park For Petroleum News
The Canadian Association of Petroleum Producers is bestowing a large chunk of credit on Chinese investments — to date and tomorrow — for raising its high-end forecast for Canadian crude oil production over the next 15 years to 4.34 million barrels per day, 3.5 million bpd from the oil sands.
But the industry’s leading lobby group also throws conservative numbers into the mix, predicting an overall slide from 3.2 million bpd in 2015 to 2.98 million bpd in 2025.
The “growth” case is tied strongly to an infusion of new money from major state-owned Chinese companies, following an injection last year of more than C$2 billion by Sinopec and PetroChina, which could gather more pace later this year when oil sands startup MEG Energy, already 17 percent owned by China National Offshore Oil Corp., plans an initial stock offering which could attract more Asian money.
“These investments will be a source of future production growth and are part of the reason for the slightly improved Canadian crude supply outlook from last year’s forecast,” CAPP said.
Forecast confirms deferrals Last year, CAPP projected that some oil sands projects would be deferred rather than cancelled. Its updated forecast has confirmed that outlook, although the economic climate has recovered and some companies are pushing ahead with phases that were put on hold during the downturn.
CAPP Vice President Greg Stringham said a “stabilizing investment climate, more robust commodity prices and market demand for Canadian crude have provided the foundation for several projects to turn to active development.”
The report said that the use of newer technology in mature fields in Alberta, Saskatchewan and Manitoba is expected to give a lift to light crude production in the next few years, notably from the Cardium plays in Alberta and the Bakken formation in Saskatchewan.
CAPP said technological innovations, such as multistage fracturing, should enable more reserves to be produced.
Stringham said these gains allow the industry to “better address the challenges of producing oil from more difficult reserves and (are) continuing to reduce environmental impacts.”
In the oil sands, CAPP said 55 percent of all bitumen production came from mining operations in 2009, with 45 percent from in-situ recovery. By 2017, it expects in-situ projects will account for more than half the total output.
Based on a survey of refiners in Canada and the United States, CAPP said traditional markets in the U.S. Midwest will continue to be well served by Canadian crude supplies and will expand as additional heavy oil refining capacity is brought on stream.
New markets needed But the rising volumes of Canadian heavy crude mean new markets must be found, with the U.S. Gulf Coast as a key target, once TransCanada’s Keystone XL pipeline is brought into service in 2013, CAPP said.
The report noted that 885,000 bpd of new pipeline capacity exiting the Western Canada Sedimentary basin will be added this year and another 885,000 bpd could go into service over the next few years, while other projects are being proposed — all part of an essential market diversity if producers are to grow their output.
Bruce Edgelow, ATB Financial vice president of energy, said CAPP’s outlook will give investors a strong base to evaluate Canada’s oil resources, especially with new offshore U.S. expansion in doubt.
He said a fair number of European investors are now transferring their focus to Canada.
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