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Report: Growth in Canadian oil production could come to ‘standstill’

A number of factors are prompting energy companies to reconsider expansion of production, report says


 

CALGARY – Growth in Canadian oil production is likely to slow down or grind to a halt five years from now once projects now under construction are built, the International Energy Agency warns in a report released Monday.

The Paris-based organization said it projects Canada to add 800,000 barrels a day of production by 2021, which would bring total output to 5.2 million barrels a day. Most of that growth is expected to come from Alberta’s oilsands, with bitumen production expected to hit 3.4 million barrels a day.

But a number of factors including the expense of producing crude from the oilsands threaten to curtail or put a stop to such growth, the IEA said.

“Heightened environmental concerns, a lack of pipeline access to new markets and the unknown impact of the victory by the New Democratic Party in Alberta’s elections last year are causing companies to slow development,” it said.

“As such, we are likely to see continued capacity increases (in) the near term, with growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed.”

A number of new developments in Canada recently commissioned or nearing completion will drive growth over the next five years, the IEA said. They include Imperial Oil’s Kearl expansion project in Alberta, which was completed in June 2015, and the Hebron offshore oil site off Newfoundland set to begin production in 2018.

The IEA report, which examined global oil production forecasts up to 2021, said there was a 24 per cent cut in oil investment around the world last year and another 17 per cent reduction is expected this year.

Jackie Forrest, vice-president of energy research at Arc Financial, agreed that oilsands development will slow down as companies look to smaller investments and faster returns.

“There is a lot of uncertainty about future growth and a lot of headwinds coming at the oilsands,” said Forrest. “Even if you assume a price recovery, there’s more of a favour for shorter cycle-type projects, unlike the oilsands which are megaproject investments.”

A decline in the number of new projects would significantly change the dynamics of the oil sector’s workforce from growth to maintenance, the industry-funded Enform organization said last week.

It projects that the number of construction jobs will drop by 84 per cent, or about 10,300 positions, by 2020, while the number of operations and maintenance jobs would grow by 9,870.

Since mid-2014, crude prices have plunged by 70 per cent. On Monday, oil was trading above US$33 a barrel.


 

Report: Growth in Canadian oil production could come to ‘standstill’

  1. So much for the “energy super power” EH?

    • It’s the worst kind of Dutch disease: recessionary Dutch disease. The glut is not likely to shrink with Iran likely to come up to speed while the best we can get is an agreement not to increase excess levels of production still more (even though we know such agreements are traditionally honored by cheating).

  2. “a lack of pipeline access to new markets” ??? what new markets; the markets are already oversupplied and the only places reachable by pipelines, USA and Mexico, are already well supplied while in global markets the lowest cost producers are meeting the demand and setting the price low even with supposed restraint. In Canada, customer access to natural gas is far from saturated east of Ontario so the current proposal to redeploy west-east natural gas transport in favor in favor of an oversupplied export oil market seems like a step in the wrong direction: a better move would be to invest in improved NG transport and distribution in the east which would reduce the fuel cost burden on the eastern provinces and help them reduce GHG emissions by replacing fuel oil and coal with NG.

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