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Canada faces shrinking US oil market
Gary Park For Petroleum News
The stage is being set in Canada for an arm wrestle without parallel over the future of the country’s oil exports.
It will pit the opponents of oil sands growth and pipeline expansions against an industry that is desperate to open new markets in Asia.
The stakes were outlined in a new report by analysts at Bentek Energy that conveys one troubling message to Canadian oil producers: Their chances of increasing shipments to the United States will come to a halt in 2018.
That’s when the combination of rising U.S. domestic production and pipeline constraints will create the possibility of Canadian oil getting pushed out of its only serious export destination, said Jodi Quinnell, who helped write the Bentek report.
“What comes in to the U.S. will slow and basically remain flat from 2018 to 2025,” she said.
U.S. self sufficiency A rapid political swing in favor of making the U.S. self sufficient in oil and advances in multi-stage fracking of horizontal wells that have opened up new crude sources in North Dakota, Oklahoma, Colorado, Michigan and even Florida will see U.S. production soar by 5 million barrels per day, or 74 percent, over the next decade, Bentek said.
The report predicts the U.S. will easily surpass its previous domestic production peak of 9.6 million bpd in 1970, reaching 11.6 million bpd in 2022.
Over that period, reliance on countries outside Canada will largely fade from current levels which see the U.S. rely on imports for 45 percent of its petroleum needs, about half from OPEC countries.
1 million bpd by tanker by 2022 Bentek estimates that by 2022, only 1 million bpd will be delivered to the U.S. by tanker, compared with 6.7 million bpd in 2011, with much greater reliance on countries such as Mexico and Brazil.
Wayne Chodzicki, the Calgary-based global head of oil and gas for KPMG, the consulting firm, told the Globe and Mail that this outlook should “cause us to, even more than we are today, realize the importance of creating additional channels to the world.”
However, not everyone agrees with the Bentek forecast. The U.S. Energy Information Administration target lags a full 5 million bpd behind Bentek’s estimate for 2022 and the Canadian Association of Petroleum Producers remains hopeful that Canadian oil will remain in high demand in the U.S.
There is also a question about whether the U.S. will be able to attract the $125 billion of investment it will require to produce an additional 5 million bpd.
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