Canada Oil Sands Output Poised for 41 Percent Increase

Canada Oil Sands Output Poised for 41 Percent Increase
IHS Markit anticipates that Canada's oil sands production will grow by nearly 1.1 million bpd.

IHS Markit recently projected that Canada's oil sands production should hit nearly 3.8 million barrels per day (bpd) in 2030, representing a nearly 1.1 million-bpd increase from current levels.

Although this year's decline in oil sands output tied to the “COVID-19 Shock” will be unprecedented and approach 175,000 bpd, IHS Markit contends the trajectory of oil sands production over the next decade should change little compared to pre-pandemic expectations. In fact, the firm pointed out in a written statement emailed to Rigzone that the 3.8 million-bpd projection for 2030 is just 2.6 percent lower than its pre-pandemic forecast of 3.9 million bpd.

“The impact of COVID-19 has changed the reason for a period of lower investment in the oil sands not necessarily the direction of long-term expectations,” remarked Celina Hwang, a senior analyst with IHS Markit who specializes in western Canada supply. “Recent reductions, albeit dramatic, are likely to be only temporary and curtailed output is expected to return.”

Before the pandemic, oil sands output was already projected to undergo a decade of “sustained-but-slower growth,” IHS Markit noted. It observed that transportation constraints, such as insufficient pipeline capacity, and the resulting sense of price insecurity in the region had disincentivized new large-scale investments.

The restoration of curtailed production and ramp-up of existing installed capacity should contribute to rising oil sands output during the second half of this year and into next, IHS Markit stated. If Alberta's government ease its regulated curtailment, the firm projects that oil sands production could by 2022 grow by more than 300,000 bpd compared to 2019 levels. Its scenario subsequently envisions most of the decade's remaining production growth coming from COVID-19 recovery and the existing production capacity ramping up.

More than 500,000 bpd – roughly one-half – of the rise in output should stem from incremental investments in new capacity , IHS Markit predicts. The company stated that it expects most of the new capacity to come from projects in which capital has already been deployed, with less than one-third coming from entirely new greenfield operations or expansions of existing facilities.

“Despite the COVID-induced shocks of 2020 the longer-term expectations for Canadian oil sands are not far off from what was expected prior to the pandemic,” concluded Kevin Birn, IHS Markit vice president and head of the firm's Oil Sands Dialogue. “The scale of installed production capacity that exists today, the lack of material production declines from existing operations in the medium to long-term and the ability to optimize and leverage current operations support growth.”

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