Industry poised for record year on global stage

Despite the discord between Ottawa and the fossil fuel sector, Canada’s oil industry appears poised to set a global record for production increases this year, mostly due to the expected startup of the Trans Mountain pipeline expansion, an analysis by Toronto-dominion Bank suggests.

“The year ahead is shaping up to be a promising one for Canada’s energy sector,” Marc Ercolao, an economist at TD, said in a report on March 7. “Canada has the potential to be the largest source of crude supply growth to the global market.he estimates that an expected jump in output of 300,000 to 500,000 barrels per day (bpd) could vault the sector ahead of the United States.

Canada currently produces 4.9 million barrels of oil per day, placing it fourth behind Saudi Arabia, the U.S. and Russia for output.

Ercolao figures Canadian production this year could soar to a range of 5.2 million bpd to 5.4 million bpd — “a record high” — if the increase in output reaches the top end of his range. Even at the low end, the rise in production could outpace that of the U.S., which is forecast to add a “more modest” 170,000 bpd.

“In this sense, Canadian oil will continue to gobble up global market share” — about six per cent of world production, Ercolao said.

Ottawa’s nearly completed Trans Mountain pipeline expansion is “the biggest factor” in the projected production increase, Ercolao said.

The federal government’s controversial pipeline, years behind schedule and much more expensive than initially predicted, is scheduled to be up and running in the second quarter. Alberta’s oilsands unleashed record amounts of production at the end of last year to take advantage of the expanded pipeline’s capacity to 890,000 bpd from 300,000 bpd.

Besides getting more Canadian crude to market, Ercolao forecasts, as do others, that the Trans Mountain’s capacity will help shrink the discount between the U.S. benchmark West Texas Intermediate and Western Canadian Select, possibly to $3 to $4 per barrel from the $18 to $20 that has been in place during the past several years.

As a result, the economist said the oil industry “will carry positive impacts for Canadian real (gross domestic product), aiding a 2024 soft-landing scenario.” He estimates the oil and gas sector, which accounts for four per cent of real GDP, could end up boosting Canada’s growth this year by 0.2 to 0.4 percentage points.

“This is potentially impactful as Canada enters a cyclical slowdown, where we expect growth to register under one per cent,” he said.

It’s not just TD predicting a banner year for the Canadian sector.

Three of the world’s major energy forecasters are calling for most of the increase in supply to come from nonmembers of the Organization of Petroleum Exporting Countries this year, mainly Canada, the U.S., Brazil and Guyana.