Collapse in crude price to pinch Canada's long-term oil output growth
Published on Wed, 10 Jun 2015 46 times
An industry group in the world’s 5th largest producer said that the collapse in crude prices will pinch Canada’s long-term oil output growth by more than a million barrels a day, highlighting the lasting impact of energy companies’ capital spending cuts.
The Canadian Association of Petroleum Producers estimates Canada will produce 5.3 million barrel per day by 2030, down from a forecast of 6.4 million barrel per day published a year ago, due to the sharp drop in world oil prices over the past year.
The downgrade underscores how Canada’s oil industry has reacted differently than the US in the face of oil prices 40% lower than a year ago. Together, the two countries will be a bulwark of oil supply growth as global demand surpasses 100 million barrel per day in the next decade.
Shale drillers in the US are more nimble in the face of oil price moves. The idling of hundreds of drilling rigs points to a decline in US production later this year.
In Canada, most production gains are coming from the Alberta oil sands, an expanse of tar-like bitumen that requires great upfront investment and pays back over decades. Once built, oil sands projects tend to run at full capacity.
Capp, based in Calgary, estimated Canadian oil production would rise by 151,000 barrel per day to 3.893 million barrel per day in 2015, and top 4 million barrel per day in 2016, a similar forecast to last year’s.
Companies such as ExxonMobil-controlled Imperial Oil are completing projects begun years ago. This year, Imperial will double production capacity at its Kearl oil sands project to 220,000 barrel per day.
Mr Ryan Kubik, CEO of Canadian Oil Sands, the largest shareholder in the Syncrude oil venture in Alberta, said that “The existing operations are very competitive, even under low oil price cycles. Where you see the impact is more on future investments.”
Oil sands producers have however deferred or cancelled billions of dollars worth of capital spending on new projects, delaying new supplies planned for late in the decade. Royal Dutch Shell, for example, withdrew its application to build a 200,000 barrel per day oil sands mine at Pierre River, Alberta.
Mr Marvin Odum, Shell’s head of exploration and production in the Americas, said that “We’re not investing in significant expansion in oil sands mining at this point in time.”
Capp estimated total oil and natural gas industry capital spending at CAD 45 billion in 2015, down nearly 40% from 2014. Oil sands capital spending will be 30% lower at CAD 23 billion.
Source : The Financial Times