The Woken Giant
IT WOULD BE DIFFICULT TO PINPOINT
a five-year trend in the energy sector more monumental than the U.S. oil boom. The increase in U.S. shale production over the past few years boosted total output from an average 5.6 million barrels per day (bpd) in September 2011 to 9.4 million bpd four years later and came online so quickly that it broke historical records for growth and shifted the global oil market. The results, as we know, are being felt by all players throughout the international market – particularly in Canada, where we depend almost solely on the U.S. for oil exports. What was once a question of meeting demand is now a question of managing a surplus of supply.
Despite the slowing shale oil production in 2015, America’s richest shale plays are holding (relatively) strong. Encana’s recent divestment of shale assets in Colorado and Louisiana in favor of its assets in the Permian Basin, Eagle Ford, and other plays is a small indication of a larger trend as Canadian producers and service companies increasingly target Texas. The comparatively low costs of production in the U.S., particularly in Texas, are slowly elbowing out competitors focused on Canada.
Of course, Canada-U.S. relations have also been influenced by energy in recent years. President Barack Obama shot down TransCanada’s proposed Keystone XL pipeline on the grounds that Alberta’s oil sands pose a heightened environmental risk because of its relative carbon intensity. Meanwhile, emissions in regions like the U.S. portion of the Bakken go largely unchecked, with little specificity around how much carbon and methane is actually being emitted, as this report will point out. Perhaps now as much as any time in the past, Canada’s energy industry is at the mercy of its neighbor to the south, a sleeping giant no more.