Oil pro­duc­tion ex­pected to rise

Cana­dian As­so­ci­a­tion of Petroleum Pro­duc­ers says out­put to rise to 5.6 mil­lion bpd by 2035

The Beacon Herald - - BUSINESS - DAN HEAL­ING THE CANA­DIAN PRESS

CAL­GARY — Canada’s oil pro­duc­tion is ex­pected to in­crease by 1.4 mil­lion bar­rels per day (bpd) by 2035, de­spite an ongoing “com­pet­i­tive­ness gap” that dis­cour­ages in­vest­ment, ac­cord­ing to the Cana­dian As­so­ci­a­tion of Petroleum Pro­duc­ers.

To­tal Cana­dian oil pro­duc­tion will in­crease to 5.6 mil­lion bpd in the next 17 years mainly due to a 58 per cent rise in oil­sands pro­duc­tion to 4.2 mil­lion bpd, the group, which rep­re­sents Canada’s up­stream oil and gas sec­tor, says in its an­nual fore­cast.

The in­crease is only slightly higher than the one pre­dicted a year ago and is down sub­stan­tially from the Cal­gary-based as­so­ci­a­tion’s 2014 pre­dic­tion that oil pro­duc­tion would grow to 6.4 mil­lion bpd by 2030, said CEO Tim McMil­lan on Tues­day.

“I think that Canada can do bet­ter,” he said while pre­sent­ing the num­bers at the Global Petroleum Show, an an­nual three-day oil and gas mar­ket­place and con­fer­ence in Cal­gary.

“We are down sub­stan­tially from what we were pre­dict­ing in 2014 and that very much mir­rors the cap­i­tal in­vest­ment that we’ve seen both glob­ally and in Canada, as well as we face some sig­nif­i­cant head­winds on mar­ket ac­cess and gen­eral com­pet­i­tive­ness.”

The fore­cast is based on a sur­vey of spend­ing plans and project ap­provals by in­dus­try par­tic­i­pants.

Oil­patch crit­ics said the fore­cast is too op­ti­mistic given a grow­ing global ap­petite for cleaner fu­els and re­new­able op­tions such as so­lar and wind power.

“I think it’s very ag­gres­sive and very op­ti­mistic, ab­so­lutely, given what’s go­ing on when you take a look at both pos­i­tives and neg­a­tives in terms of in­vest­ment in that in­dus­try,” said Robyn Al­lan, an in­de­pen­dent econ­o­mist and one-time CEO of the In­sur­ance Cor­po­ra­tion of Bri­tish Columbia.

Events such as the In­ter­na­tional Ma­rine Or­ga­ni­za­tion’s call to re­duce sul­phur lev­els in bunker fuel in 2020 will re­duce de­mand and head off project con­struc­tion in the oil­sands, she said.

“The harsh truth that they need to face is that in 2035 we won’t be buy­ing what they are sell­ing, and that’s a good thing if we want our kids to in­herit a liv­able planet,” added Green­peace Canada’s se­nior en­ergy strate­gist Keith Ste­wart.

West­ern Canada’s non-oil­sands crude pro­duc­tion will be about 1.3 mil­lion bpd in 2035, up slightly from 2017, ac­cord­ing to the CAPP fore­cast.

Oil out­put in Eastern Canada is ex­pected to rise to 290,000 bpd by 2025 thanks to ma­jor off­shore projects in­clud­ing He­bron, Hiber­nia, Terra Nova, and White Rose, and then drop to just 70,000 bpd by 2035 as those oil wells are de­pleted.

The Eastern Canada part of the fore­cast could change dra­mat­i­cally, how­ever, if the govern­ment of New­found­land and Labrador suc­ceeds in its plan to ac­tively at­tract new in­vest­ment, McMil­lan said.

Canada’s oil out­put ex­ceeded its trans­port ca­pac­ity in 2017, CAPP said, as pro­posed pipe­lines in­clud­ing Tran­sCanada’s Key­stone XL project, the ex­pan­sion of the Trans Moun­tain pipe­line and En­bridge’s Line 3 pipe­line re­place­ment con­tin­ued to face un­cer­tainty.

“In our fore­cast, we need all of those pipe­lines,” said McMil­lan. “If you take any of them out of the mix, we would not have the ca­pac­ity.”

The fed­eral govern­ment has since made a deal to buy Trans Moun­tain from Kin­der Mor­gan Canada Ltd. for $4.5 bil­lion, a deal that CAPP has re­luc­tantly en­dorsed.

CAPP said Canada is los­ing its com­pet­i­tive edge, sug­gest­ing more ef­fi­cient reg­u­la­tion in the U.S. is partly re­spon­si­ble for en­ergy cap­i­tal spend­ing there rising by 38 per cent to $120 bil­lion in 2017 while in­vest­ment in Canada fell to $45 bil­lion.

A year ago, CAPP fore­cast Cana­dian oil pro­duc­tion would climb by 33 per cent to 5.12 mil­lion bar­rels per day by 2030. This year’s fore­cast, which ex­tends five years fur­ther into the fu­ture, calls for 5.4 mil­lion bpd by 2030.

THE CANA­DIAN PRESS FILES

Tim McMil­lan, CEO of the Cana­dian As­so­ci­a­tion of Petroleum Pro­duc­ers, says that while oil pro­duc­tion in Canada is ex­pected to in­crease to 5.6 mil­lion bar­rels per day in the next 17 years, the coun­try can do bet­ter.

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