|Forecast of Canadian Oil Sands versus Conventional Oil Production. Click to enlarge. Source: CAPP|
Production of crude oil in Canada is set to nearly double by 2020, according to the Canadian Association of Petroleum Producers’ (CAPP) just-released annual Crude Oil Forecast.
This marks a significant increase from the projections last year, driven by increasing oil sands production.
Total Canadian oil production is projected to increase from 2.5 million barrels per day (bpd) in 2005 to 4.6 million bpd in 2015—an increase of 750,000 bpd from CAPP’s 2005 forecast. Growth after 2015 will bring total Canadian production to nearly 4.9 million bpd by 2020.
Oil sands production, which now exceeds one million bpd, is forecast to reach 3.5 million bpd by 2015 and 4.0 million bpd by 2020, accounting for more than 80% of Canadian production. In 2005, oil sands production represented 45% of total Canadian output.
Both in-situ and mining projects contribute to the growth in oil sands production, with a four-fold increase in production for each category.
Production of conventional crude oil has declined gradually in Canada since the late 1990s. Although the lifespan of conventional producing wells is being extended as marginal wells are economic due to higher oil prices, conventional production continues to decline.
The growing total production will need more pipeline capacity to meet demand from new and expanded markets. A number of new pipelines and expansions have been announced and potential shippers are assessing the alternatives to determine which projects they support.
The increase in our overall production is important but the changing mix of the Canadian crude slate from traditional conventional crude to oil sands heavy blends and synthetic crude is also a big issue for the industry. It’s critically important for pipelines and refineries to be able to process both the added volumes of crude and the new mix.—Greg Stringham, CAPP Vice President, Markets and Fiscal Policy
Conventional heavy oil and bitumen oil must be diluted with a lighter commodity such as condensate/pentanes or synthetic crude to lower the viscosity and density of the crude, thereby allowing for efficient transportation through pipelines.
The main source of diluent so far has been condensates/pentanes produced in western Canada. These products are in decline, and will not provide sufficient supplies of diluent to match forecast growth of oil sands bitumen.
Accordingly, producers have been evaluating options to import condensate using either existing infrastructure such as railroads or through a condensate import pipeline. As an alternative, producers are also considering using synthetic for blending.
CAPP’s 2006 production forecast contains two supply scenarios based on the evolution of each scenario.
In addition, a constrained production case shows how delays in the growth of markets, pipelines, infrastructure, equipment and labour could potentially slow oil sands development.
The forecast does not factor in possible environmental constraints on growth in oil sands production, such as water availability.