Canadian oil production could come to a ‘complete standstill.’
Atlantic offshore drilling could also hit brakes
• Canadian oilsands growth is likely to come to a “standstill” after the projects under construct i on come on stream as heightened environmental concerns, lack of pipeline access and policy changes slow investment, the International Energy Agency warned Monday.
“We are likely to see continued capacity increases ( i n) the near term, with growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed,” the IEA said in its Medium-Term Oil Market report presented at an energy conference in Houston.
Canada is expected to increase production by about 100,000 barrels per day this year with additional quantities of 285,000 and 220,000 bpd coming online in 2017 and 2018, respectively, as projects such as Suncor’s Fort Hills oilsands project, and Hebron, the East Coast offshore joint- venture development, start up.
But beyond the projects planned during the era of high oil prices, 2019 and 2020 will each see Canadian crude output rising by a mere 35,000 bpd.
“While some companies are currently running with negative operating cash costs, no major shut- ins or plant closures have been announced to date,” the IEA said.
By 2021, Canadian oil output is forecast to average 5.2 million bpd, of which bitumen output from Alberta will account for nearly 3.4 million bpd, or twothirds of total supplies.
The slowdown i n Canadian production is part of a bigger “plunge” in global oil production that poses supply security risks for the world, as companies slash investments to weather oil prices of around US$ 32 per barrel, the IEA said.
“It is easy for consumers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on the wall: The historic investment cuts we are seeing raise the odds of unpleasant oil- security surprises in the not- too- distant- future,” said IEA executive director Fatih Birol, launching the report at IHS CERAWeek event in Houston.
Global supply has to rise about three million bpd annually just to account for decline in production, in addition to 1.2 million bpd t o accommodate annual increase in demand, Birol said. The pressure on demand will push prices up to US$ 80 per barrel by 2020, Birol said.
The Paris- based energy watchdog forecasts slightly more than 4.1 million bpd of crude oil adding to the global supply till 2021, compared to 11 million bpd between 2009- 2015. The industry is expected to cut spending by 17 per cent this year, to add to the 24- percent decline last year.
U. S tight oil output will decline by 600,000 bpd this year and another 200,000 bpd in 2017, however it’s unlikely to spell the end of the shale revolution in that country, the IEA noted.
Despite the U. S lifting its oil export ban, in North America only Canada is expected to see a notable uptick in shipments as producers increasingly target Asian markets.
The additional Canadian exports are not dependent on the construction of either Kinder Morgan Inc.’s Trans Mountain expansion or Enbridge Inc.’s Northern Gateway or even TransCanada Corp.’ s Energy East pipeline, the IEA said.
“Rather, crude will follow existing routes to Asian markets where small volumes have already reached OECD Asia Oceania, China and Other Asia,” the IEA said.
Even as global oil supply starts plunging, global demand will continue to accelerate, rising to 100 million bpd by 2020, compared to 94.4 million bpd in 2015.
But new climate- change policies and a f ocus on energy efficiency in many key countries could revise that demand outlook downward, Birol noted.