Canada needs to improve its competitiveness and get pipelines built—if it wants to transport an additional 1.6 million barrels per day (b/d) of western Canadian production growth by 2035 to new emerging markets. That’s according to the 2018 Crude Oil Forecast, Markets and Transportation report by the Canadian Association of Petroleum Producers (CAPP).
“Canadian production is forecast to rise to 5.6 million b/d and yet we do not have the means of getting it to new, global markets,” says CAPP president and CEO Tim McMillan.
Bolstering growth will be a rise in oil sands production to 4.2 million b/d from 2.65 million b/d – despite a decline in capital spending in the sector for the fourth consecutive year.
The steady decline in capital spending highlights a major issue for Canada’s industry. An increasing competitiveness gap continues to impede Canada when it comes to attracting foreign investment.
“The competition for capital investment in the global marketplace is fierce and Canada is losing,” says McMillan. “A lack of regulatory clarity and the inability to see federally-approved pipelines get built sends the signal that Canada is closed for business.”
Canadian oil producers continue to face pipeline constraints as federally-approved projects such as Kinder Morgan’s Trans Mountain expansion pipeline, Enbridge’s Line 3, and TransCanada’s Keystone XL have yet to begin construction. In 2017, Canada’s oil supply – comprised of oil production and diluent – was 4.2 million b/d, exceeding existing available pipeline capacity. CAPP forecasts oil supply will rise another two million b/d to 6.2 million b/d by 2035.
Meanwhile, the United States continues to aggressively streamline and reduce the costs associated with its regulations. Capital spending in the U.S. rose 38 per cent to $120 billion in 2017.
“Canada is falling behind its competitors, losing the opportunity to supply the world with oil produced the Canadian way. The U.S. is increasing its oil exports to the same emerging markets Canada is targeting,” notes McMillan.
“It is difficult for Canadian producers to ensure fair market value for our natural resources without major pipelines or access to new, emerging markets in regions such as China, India and Southeast Asia.”
The report finds that Western Canada accounts for about 95 per cent of the country’s total production, with conventional oil – including pentanes and condensates – representing more than one million b/d of the region’s total. Through to 2035, conventional production will remain largely flat – rising to 1.33 million b/d from 1.32 million b/d in 2017. The greatest potential for growth will be in the liquids-rich Montney and Duvernay formations, expected to contribute about 500,000 b/d of pentanes and condensates by 2026.
In Eastern Canada, oil production will rise to 290,000 b/d by 2025 from major offshore projects including Hebron, Hibernia, Terra Nova, and White Rose. Hebron will account for the bulk of the production highs between now and 2025 as the region’s newest producing project ramps up. Beyond 2025, production will drop to 70,000 b/d by 2035.
Download the full report at capp.ca/CrudeOilForecast.