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Canadian Crude Oil Production: CAPP Predicts Extraction Will More Than Double By 2030

06/05/2013 01:17 EDT | Updated 08/05/2013 05:12 EDT
AP
CALGARY - A major oil and gas lobby group expects Canada's crude oil production to grow at a faster clip than previously forecast, despite uncertainty around new pipelines to bring that product to market.

In its annual oil forecast, the Canadian Association of Petroleum Producers said Wednesday it expects crude oil output to hit 6.7 million barrels per day by 2030, up from 3.2 million last year.

That's 500,000 barrels per day more than the group called for in its 2012 forecast.

Accounting for the majority of the more bullish forecast — 300,000 barrels per day — is growing conventional oil, as technological advances help squeeze more crude out of mature oilfields in western Canada.

Canadian oil producers have been anxious to get their product to the best-paying markets, as a lack of adequate pipeline capacity has led to a supply glut, dampening prices.

Environmental opposition and political wrangling have slowed down a number of pipeline proposals, whose fates remain up in the air.

But that uncertainty isn't constraining Canadian oil growth in the forecast, said Greg Stringham, CAPP's vice-president of markets and oilsands.

"I think it affects the timing of this growth. I don't think it affects the ultimate growth at the end of the forecast," he said.

He added that volumes moving by rail — currently 500,000 barrels per day and growing — have been factored in for the first time.

"The forecast is not dependent on any single pipeline, but it is dependent on having enough pipeline and rail capacity to be able to move it."

The Keystone XL pipeline, which would connect oilsands crude to U.S. Gulf Coast refineries, has faced numerous setbacks. The company proposing it, TransCanada Corp. (TSX:TRP) recently pushed back its in-service date by several months to late 2015 as the Obama administration weighs whether to allow it.

Meanwhile, the B.C. government has come out against Enbridge Inc.'s (TSX:ENB) Northern Gateway pipeline to the West Coast, which would enable crude exports to lucrative Asian markets. There is also opposition to the Trans Mountain expansion to the B.C. Lower Mainland proposed by Kinder Morgan.

Both TransCanada and Enbridge have plans in the works to ship western crude eastward by reconfiguring existing pipes. If those plans go ahead, refineries in Quebec and New Brunswick, which currently import 86 per cent of the crude they need, would have a cheaper source of domestic oil.

That means a potential 700,000-barrel-per day market for Canadian crude.

"That was a much higher percentage than I actually even imagined," said Stringham.

"That is a big opportunity that I think is being capitalized on now, that wasn't as much discussed or even in our forecast last year."

Stringham said by 2026, the industry will need more pipeline capacity than what proposals currently on the table have to offer.

Pipeline company CEOs speaking at a National Energy Board forum on Wednesday said they're optimistic the industry can rise to that challenge.

"The pipeline projects that are on the drawing board right now would certainly take us through the next decade and beyond that, of course more opportunities exist and I think we'll be able to meet those," said Enbridge CEO Al Monaco.

TransCanada CEO Russ Girling said the industry will "continue to be inventive and creative."

"Rail has obviously become a very important option for producers today both in Canada and the United States. I can see integration of rail alternatives and pipe alternatives together in order to meet those needs and changing demands."

In the CAPP forecast, conventional oil output is expected to grow modestly from 1.2 million barrels per day to 1.4 million barrels per day in 2015 and remain at that level through to 2030.

But just a few years ago, CAPP was predicting a drop in that type of production. Technological advances in so-called "tight" oil fields such as Saskatchewan's Bakken region are helping offset predicted declines.

CAPP expects oilsands output to grow to 5.2 million barrels per day by 2030, up from 1.8 million barrels last year.

Over the forecast period, in-situ methods, which use steam and sometimes solvents to extract the bitumen, are expected to further eclipse more traditional mining techniques.

In 2012, 800,000 barrels per day were mined, and one million barrels were drawn to the surface through in-situ techniques.

By 2030, 1.7 million barrels are expected to be recovered through mining, while 3.5 million will be in-situ.

— with files from Bill Graveland

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