Canada sec­ond only to u.s. in oil pro­duc­tion growth

North Bay Nugget - - BUSINESS - Jesse snyder

OT­TAWA — Cana­dian oil pro­duc­tion could edge closer to the five mil­lion bar­rel-per-day mile­stone in 2018, with sup­plies ex­pected to grow the sec­ond-fastest among ma­jor pro­duc­ers in com­ing years, a new re­port says.

In its monthly oil re­port re­leased Wed­nes­day, the paris-based In­ter­na­tional en­ergy agency said Cana­dian oil out­put is ex­pected to rise by 290,000 bpd this year, and by an­other 200,000 bpd in 2018 to reach 4.95 mil­lion bpd.

The Iea’s es­ti­mates for Cana­dian oil out­put were re­vised up­ward due to “ro­bust pro­duc­tion” across the sec­tor, par­tic­u­larly in the oil­sands.

The Iea re­port also es­ti­mated u.s. oil pro­duc­tion will grow 470,000 bpd in 2017, and as much as 1.1 mil­lion bpd in 2018. The coun­try re­mains the fastest­grow­ing non-opeC pro­ducer in the world, just ahead of Canada.

To­gether, the 2.06-mil­lion bpd surge in North amer­i­can pro­duc­tion over the next two years could off­set any new mea­sure by opeC to ex­tend its 1.8 mil­lion bpd cut be­yond march 2018 — an idea that ap­pears to be gain­ing sup­port among opeC mem­bers and its al­lies.

u.s. crude fu­tures rose 1.1 per cent, to us$48.75 per bar­rel, af­ter the Iea re­port also noted that global crude in­ven­to­ries were start­ing to de­cline.

Cana­dian oil pro­duc­tion has risen faster than most coun­tries since oil mar­kets col­lapsed three years ago, as oil­sands ex­pan­sion projects that were com­mis­sioned years ago be­gan to come on­line.

If the mo­men­tum con­tin­ues next year, Canada could dis­place Iraq as the fourth largest pro­ducer in the world af­ter the united states, rus­sia and saudi ara­bia. Iraq pro­duced an av­er­age of 4.5 mil­lion bpd in the first half of 2017 and is not ex­pected to see a sharp rise in pro­duc­tion in the next 18 months.

oil­sands pro­duc­tion is ex­pected to meet the 3 mil­lion bpd thresh­old by the end of 2018, up from around 2.7 mil­lion bpd to­day. To­tal Cana­dian oil sup­ply is ex­pected to near the 4.95 mil­lion bpd mark in 2018, and could sur­pass 5 mil­lion bpd in the sec­ond half of the year.

The uptick is mainly due to pro­duc­tion growth at sun­cor en­ergy Inc.’s Fort hills oil­sands mine and the he­bron project in off­shore New­found­land and Labrador, op­er­ated by a con­sor­tium in­clud­ing sun­cor, exxonmo­bil Corp., Chevron Corp. and oth­ers. Con­struc­tion of Fort hills is 90 per cent com­plete, while he­bron is ex­pected to reach first oil this year.

sun­cor has raised the name­plate ca­pac­ity of its Fort hills project from 180,000 bpd to 194,000 bpd, and has raised its cap­i­tal spend­ing pro­gram to com­plete pro­duc­tion at the de­vel­op­ment. Costs for the ven­ture have also risen for the project, and now stand at $17 bil­lion, ac­cord­ing to the Iea.

sun­cor’s joint-ven­ture part­ner on the project, To­tal sa, re­cently said it wouldn’t raise its spend­ing on the project any fur­ther, and has openly con­tem­plated fur­ther re­duc­ing its stake in the de­vel­op­ment af­ter re­duc­ing its po­si­tion to 29.2 per cent in 2015.

The re­port comes amid dim­ming prospects for long-term oil­sands growth, as de­pressed prices have spurred sev­eral in­ter­na­tional oil com­pa­nies to shed their po­si­tions in north­ern al­berta. oil­sands pro­duc­tion is ex­pected to grow over the next five years, but could see flat­ten­ing sup­plies soon af­ter 2020, an­a­lysts say.

Com­pa­nies in­clud­ing royal dutch shell pLC and Cono­cophillips Co. have di­vested more than $20 bil­lion in oil­sands as­sets since the be­gin­ning of 2017, and other pro­duc­ers like sta­toil asa and To­tal have pared their ex­po­sure to the re­gion.

per­sis­tently low oil prices have also raised ques­tions over the eco­nomics of ma­jor pipe­line pro­pos­als in Canada.

most an­a­lysts ex­pect oil pro­duc­tion lev­els in Canada to out­pace pipe­line ca­pac­ity in com­ing years as new oil­sands pro­duc­tion en­ters the mar­ket. but the po­ten­tial con­struc­tion of two new oil con­duits, Tran­sCanada Corp.’s Key­stone XL and Kin­der mor­gan Canada Ltd.’s Trans moun­tain ex­pan­sion project, could sop up ex­cess sup­ply by around 2020.

re­cent re­ports sug­gest Tran­sCanada is still se­cur­ing ship­per com­mit­ments on the last bit of avail­able space in its Key­stone XL line, while an­a­lysts have ques­tioned the long-term vi­a­bil­ity of its 1.1-mil­lion bpd en­ergy east project.

The com­pany put a tem­po­rary pause on the project days af­ter the Na­tional en­ergy board de­cided to ex­pand its re­view of the pro­posal to in­clude up­stream and down­stream emis­sions.

SUP­PLIED PHOTO

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