June 2018 Crude Oil Forecast, Markets and Transportation
Canada needs to improve its competitiveness and get pipelines built if it wants to transport an additional 1.5 million barrels per day (b/d) of oil sands production growth by 2035 to new emerging markets, the Canadian Association of Petroleum Producers announced in its 2018 Crude Oil Forecast, Markets and Transportation report.
A lack of competitiveness continues to be one of Canada’s biggest impediments when it comes to attracting foreign investment. The country’s inability to get major pipelines built, create and implement efficient regulatory policies, and uncertainty related to provincial and federal climate change policies – along with a series of cancelled projects such as Northern Gateway, Pacific NorthWest LNG, Energy East – has eroded investor confidence in Canada’s energy sector.
Total Canadian oil production is expected to increase to 5.6 million b/d by 2035 – an increase of 1.4 million b/d compared to 2017. Bolstering growth will be a rise in oil sands production to 4.2 million b/d from 2.65 million b/d – despite a decrease in oil sands’ capital spending for the fourth consecutive year.
Growth Forecast for Canadian Crude Oil Production
Source: CAPP, 2018
Western Canada accounts for about 95 per cent of the country’s total production, with conventional oil – including pentanes and condensates – representing more than one million b/d of the region’s total. Through to 2035 conventional production will remain flat – rising to 1.33 million b/d from 1.32 million b/d in 2017. The greatest potential for growth will be in the liquids-rich Montney and Duvernay formations, expected to contribute about 500,000 b/d of pentanes and condensates by 2026.
In Eastern Canada, oil production will rise to 290,000 b/d by 2025 from major offshore projects including Hebron, Hibernia, Terra Nova, and White Rose. Hebron will account for the bulk of the production highs between now and 2025 as the region’s newest producing project ramps up. Beyond 2025, production will drop to 70,000 b/d by 2035.
Canadian oil producers continue to face pipeline constraints as federally-approved projects such as Kinder Morgan’s Trans Mountain expansion pipeline, Enbridge’s Line 3, and TransCanada’s Keystone XL remain in limbo. In 2017, Canada’s oil supply – comprised of oil production and diluent – was 4.2 million b/d, exceeding existing available pipeline capacity. CAPP forecasts oil supply will rise another two million b/d to 6.2 million b/d by 2035.
Pipeline Proposals in Canada and the United States
Source: CAPP, 2018
Meanwhile, the United States – Canada’s biggest customer and its biggest competition – continues to streamline aggressively and reduce the costs associated with its regulations. Capital spending in the U.S. rose 38 per cent to $120 billion in 2017 while investment in Canada fell to $45 billion.