Oil production forecast lowered

The National Energy Board has downgraded its long-term outlook for oil prices and Canadian production in the face of lower global industry costs and stricter environmental regulations.

In an update released Wednesday, the regulator projects inflation-adjusted oil prices rising to US$68 a barrel by 2020 and US$90 by 2040, $12 and $17 a barrel lower, respectively, than in its January report.

“A lot of it is the ability of oil production to be sustained at lower prices,” said Shelley Milutinovic, chief economist at the NEB.

“There’s an expectation that somewhere between 40 and 60 dollars a barrel, you can get a lot of oil production around the world,” she said.

The lower prices are expected to translate to lower long-term production for Canada, where costs are comparatively high.

The NEB projects oil production to increase from four million barrels a day in 2015 to 5.7 million barrels a day by 2040, which is 391,000 barrels a day less than what it estimated in its January report.

The lower oil prices would only have a modest effect on increased oilsands production in the near-term, as projects are already under construction, but recently cancelled and deferred projects start to hit production numbers by 2019.

Increasing prices in the longer-term would bring a return to steamextraction oilsands growth, while mining-based oilsands production remains flat from 2020 onward as the high cost of the large-scale projects make them less economic.

Rapidly changing climate policy is also creating increased uncertainty for oil and gas, but so far it’s playing out more in changing projections in the electricity sector.