Oil sands growth belies bleak outlook

Canada’s oil sands output will grow steadily through 2020 on the back of a series of new start-ups, but the outlook turns sour soon after as operators defer new investments due to low oil prices.

ExxonMobil has started output at its Kearl expansion several months ahead of schedule, doubling capacity to 220,000 b/d. It also started its Cold Lake Nabiye expansion, which will lift output to 40,000 b/d by the end of 2015 from 12,000 b/d in late February. 

ConocoPhillips’ Surmont phase 2 project is on track to start up in the third quarter, which will raise gross capacity to 150,000 b/d by the end of 2017 from 27,000 b/d now. Canada’s Husky Energy started the first 30,000 b/d plant at its Sunrise project in March, with the second 30,000 b/d plant expected to follow in September.

Canadian firms Cenovus’ Christina Lake phase F, Canadian Natural Resources’ Horizon phase 3 and Suncor’s Fort Hills venture are still on track for start-up after 2015.

Oil sands output will rise by 6pc to 2.29mn b/d this year, and to 3.07mn b/d by 2020, Canadian oil industry association Capp says. But Capp has cut its 2030 forecast for total Canadian output by 17pc since last year’s projection to 5.3mn b/d, reflecting an expected slowdown in oil sands investment decisions because of lower oil prices. It now expects crude production to grow from 3.7mn b/d last year to 5.3mn b/d by 2030, down 1.1mn b/d from last year’s forecast.

Energy regulator the National Energy Board in March estimated that over 500,000 b/d of planned oil sands capacity had been cut since June 2014.

Low prices aside, they also face another headwind. Producers could lose up to $100bn over the next 15 years if no new crude pipelines are built to increase take away capacity from the oil sands in western Canada, according to consultancy Wood Mackenzie.

For more information, please contact OilBlog@argusmedia.com