Canadian oil output to rise despite lower outlook for oilsands mining (with graphic) {at source}

EDMONTON JOURNAL ^ | JUNE 6, 2013 | DAVE COOPER

[thackney]

Canada’s oil production will hit a record 6.7 million barrels per day by 2030, the Canadian Association of Petroleum Producers said Wednesday, increasing its estimate from last year by 500,000 barrels per day.

Almost all the oil will come from Western Canada, with Alberta’s oilsands producing 5.2 million bpd and the rest coming mostly from Alberta and Saskatchewan conventional and tight oilfields.

“While the oilsands in situ production (from chiefly SAGD — steam assisted gravity drainage) will increase by 400,000 barrels, we will see a decrease of 200,000 barrels from mining projects that have been deferred (since last year’s report),” said Greg Stringham, CAPP’s vice-president for markets and oilsands.

CAPP’s estimate of major projects that will proceed does not include all projects previously announced.

Stringham says the next five to seven years of projections are solid “because oil coming on in that period (is) from projects that are already in construction,” but others simply won’t be built.

“We have taken 20 to 25 per cent off the total number of proposals. We have looked at constraints in the Alberta economy, such as labour, and applied that to the list, which has dropped down the number we are using in our forecast,” he said.

Stringham would not discuss which projects CAPP has deemed unlikely to proceed, but he said new in situ projects have proven to be very economic to build.

Predictions of lower world oil prices in the next few years, partly because of quickly rising production in the U.S. and the return of Iraq to the market, have led to concerns that Alberta projects will need to survive in a lower-priced environment.

And Stringham said the issue of pipelines will play a critical role in how this evolves. While pipeline space is now tight, he said there have been no reports of “shut-in” production that has occurred with the natural gas industry.

“No one has come to us and said they have not been able to produce oil from their existing projects because they have not been able to move it to market. But it may not go to the market (and get the price) that they want,” he said.

The other big change in CAPP’s latest Crude Oil Forecast, Markets and Transportation report was the emphasis on conventional tight oil, which is expected to keep Canada’s conventional light oil production at about 1.4 million bpd. Previously it had been predicted to decline.

“No one saw the emergence of tight oil four years ago. But now much of the oil moving through pipelines is Bakken (North Dakota) oil,” he said, adding that an abundance of light oil could have an impact on the heavy oil market since some refineries are able to process either light or heavy crude, and will search for the best deal.

And while Stringham figures between one million and 1.8 million barrels of Alberta bitumen could find a home in the big refineries along the Gulf Coast of the U.S., it will face plenty of competition from other nations that also produce heavy oil and will fight for their share of the market.

If the Keystone XL pipeline is approved and crude-by-rail capacity keeps expanding, CAPP estimates the growing production out of Alberta and North Dakota will be accommodated for the next few years.

But after 2018, other lines will be needed, such as Northern Gateway, the Trans Mountain Expansion and the Trans Canada Energy East project to ship heavy crude bitumen to Quebec City and Saint John.

“Eastern Canada imports 700,000 barrels per day of their 800,000 barrel consumption from foreign countries,” so using North American light oil makes economic sense, said Stringham.

The Enbridge Line 9 reversal will bring western crude to Montreal, “but you need an extension beyond that to serve the market.”

Rail capacity could play a bigger role as well, and has been included for the first time in CAPP’s report. In the U.S., rail shippers are already moving 500,000 bpd out of North Dakota to refinery customers.