Canada could be pumping almost 5 million barrels per day of crude by 2020, trailing only Russia, Saudi Arabia and the United States among the world’s leading producers, according to the annual forecast by the Canadian Association of Petroleum Producers.
It’s no longer surprising that such lofty heights depend on the oil sands.
What is startling is the rate of oil sands expansion.
In updating its numbers, CAPP, whose 280 member companies account for 95 percent of Canada’s total oil and gas output, has been forced to make dramatic changes to its outlook in only the past year.
The lobby group now projects Canadian crude volumes will rise from 2.5 million bpd in 2005 to 4.6 million bpd in 2015, a hike of 750,000 bpd from its 2005 forecast.
“The increase reflects more aggressive scheduling for some projects and new investments in the oil sands,” CAPP said.
It said the mix of the Canadian crude slate will shift markedly, with conventional crude continuing its steady decline since the 1990s from 50 percent of production today to 20 percent in 2020.
In-situ 50% by 2015The latest numbers point to oil sands mining contributing 1.75 million bpd by 2015 and in-situ operations, where deep bitumen deposits are melted before being pumped to the surface, accounting for another 1.75 million bpd (more than double the 2005 in-situ prediction).
This rapid and changing growth pattern poses some additional challenges for the industry to build pipelines and refineries to handle the increasing volumes, said Greg Stringham, CAPP’s vice president of markets and fiscal policy.
He said the forecast is based on an assessment by CAPP members of what is realistic and does not cover all of the announced projects.
He said Canada’s surge from No. 8 among world producers to No. 4 is “coming at us quicker than most people anticipated,” especially for pipeline companies and refiners.
CAPP said it would be better to have too much rather than too little pipeline construction.
“The cost of a small amount of surplus pipeline capacity (in excess tools to offset the costs of unused delivery capacity) is preferable to the lost revenue from shut-in production due to insufficient pipeline capacity,” the report said.
To that end, it impressed on producers the urgent need to sign shipping contracts to support pipelines planned for increased deliveries to the United States or to open up new markets in Asia.
Newfoundland expected to peak in 2010On the downside, the decade-old industry offshore Newfoundland is expected to peak at 320,000 bpd in 2010, then slump to 160,000 bpd in 2020 because of reduced exploration, poor drilling results, tough environmental conditions and the current dispute between the industry and Newfoundland government over resource ownership and revenues.
That has already caused owners of the Hebron-Ben Nevis project — Chevron Canada, Imperial Oil, Petro-Canada and Norsk Hydro Canada — to abandon negotiations that were supposed to see a 100,000 bpd field come on stream by 2011.
CAPP also cautioned that its bullish numbers could undergo revision if there is insufficient labor to build the oil sands projects, a lack of refineries to process the volumes, a shortage of materials such as steel and equipment and if in-situ projects encounter technical problems.
At worst, CAPP does not expect adverse labor or industry conditions would reduce its target by more than 800,000 bpd.
As well, CAPP bases its supply scenarios on what producers will use to dilute bitumen for pipeline transportation — synthetic crude or imported condensate.
It also notes that the latest projects to join the oil sands line-up are counting on oil prices of no worse than US$30-$35 a barrel.