Oil and gas
BMI has said that its growth outlook for the oil and gas industry is becoming increasingly modest due to mounting headwinds in both the upstream and midstream sectors due to falling oil prices. The threats to projects in there areas are the challenging economics and regulations that could hamper oilsands growth production and LNG terminal development. This is exacerbated, according to BMI, by the likely drop in exploratory activity across Canadian acreage as companies revise capital expenditures in the coming years.
Proven oil reserves in Canada are expected to trend lower from 2014 levels of 173.2 billion to 170.82 billion in 2018, due to the above mentioned drop in oilsands investment. However, BMI has said that it expects reserves to hold around this level after 2018 due to shale developments. Proven gas reserves are expected to increase from 1.89 trillion m3 levels in 2014 to a peak of 1.96 trillion m3 in 2018 as shale deposits are booked as reserves. Starting in 2019, reserves are expected to experience steady declines in to 2023 as a result of falling exploratory activity.
Last year in Canada, BMI have reported that total liquids production was 4.2 million bpd, with volumes expected to grow an average of 6% year on year from 2017 as more upstream oilsands projects appear online. In the long term, production growth will be limited as deteriorating project economics in both conventional and unconventional sectors result in a 1% average year on year growth from 2018 to 2023.
When it comes to natural gas, the abundance of it provides Canada with considerable export potential and so far, seven LNG terminals have been approved by the National Energy Board. However, BMI has said that rising equipment and labour costs are challenging the competitiveness of new LNG projects, particularly in an increasingly bearish energy price movement. BMI anticipates Canadian gas output to fall from 2014 estimated levels of 151.4 billion m3 to 136.8 billion m3 in 2018. Midstream oil and gas infrastructure faces significant bottlenecks that need to be address in order to transport supplies more effectively across the country, but BMI has said that the potential for local opposition remains high.
The main focus of Canada’s petrochemicals sector, according to BMI, is the drive to diversify feedstock in order to meet the challenge posed by new shale capacity in the US. BMI also anticipates continued growth in output for the short term, however market diversification will be crucial to the industry’s long term success.
Last year, chemicals and plastics exports increased by approximately 12% with growth expected to continue to 5% this year. Petrochemicals exports have taken a positive direction as shipments to the US have returned to almost pre 2008 levels. BMI expects ethylene capacity to hit 5.5 million tpy by 2019 with PE falling just shy of 4 million tpy and propylene is likely to hit 1.1 million tpy. However, there is an upside and BMI think that there is potential for greater expansion in capacity over the medium term.
Edited from report briefs by Claira Lloyd