​Canadian oil production forecast gets first bump in five years; pipelines 'desperately needed'

Image: Joey Podlubny/JWN

The Canadian Association of Petroleum Producers (CAPP) has increased its crude oil production forecast for the first time in five years, but its CEO isn’t getting excited about the bump.

Oil shipments, which include diluent to blend with bitumen, are already exceeding pipeline capacity, CAPP said.

Despite oilsands capital spending that is expected to drop for the fourth consecutive year, CAPP is looking out at Canadian oil production growth above last year’s forecast, averaging about 300,000 bbls/d higher between 2019 and 2030.

Total Canadian oil production is now expected to reach 5.4 million bbls/d in 2030, up from last year’s forecast of 5.1 million bbls/d. The oilsands is expected to grow to 3.82 million bbls/d in 2030, which is up from last year’s forecast of 3.67 million bbls/d, and the 2017 actual rate of 2.65 million bbls/d.

The annual forecast is based on a survey of CAPP members. It is a summary of their individualized views of the future, and makes no assumptions about market conditions or pipeline development.

CAPP CEO Tim McMillan says the modest increase in growth expectations “a bit of a positive trend.”

“There still is some capital spending going in, and companies are working out ways to be more efficient and lower cost,” he told JWN on Tuesday.

“The bigger difference is a line which we didn’t put on here, which is compared to where we were in 2013 and 2014. Just a few years ago our growth profile was substantially higher.”

In 2013, Canadian oil production was expected to grow to 6.7 million bbls/d in 2030 – a full 1.3 million bbls/d more than what’s expected today.

“It’s not a rosy forecast, but it’s one where we’ve reset the bar quite low a few years ago and we’re now in that new range,” McMillan said.

On the positive side of the forecast, this year CAPP is recognizing greater production potential from the liquids-rich Montney and Duvernay plays. Production of pentanes and condensate, was 326,000 bbls/d in 2017, is expected to grow to a peak of 500,000 bbls/d in 2026 based largely on this potential. CAPP includes pentanes and condensate in its overall view of conventional oil production.

“I think that each year our members are realizing the true potential of that play. It’s world class, our members are technologically on the cutting edge and they are able to implement it and replicate it. The liquids-rich is where the economics are really driving the economics today,” McMillan said.

Resource potential aside, CAPP stresses that an increasing competitiveness gap continues to impede Canada when it comes to attracting energy investment.

“Prices have been escalating for quite some time, they’re now in the high $60s and I think people are looking out longer term, they see dramatic growth in crude oil demand globally, and we’re seeing capital globally going back in. It’s just not coming to Canada,” McMillan said.

“The driver there is not global, it’s very much Canadian and in some cases provincial of uncertainty in regulation, duplication, inefficiency and the inability to get major pipelines built.”