IHS has released a new production forecast for the Canadian oilsands through to 2020. IHS has said that it expects continued oilsands production growth through to this period, but at a lower level than what would be expected if prices remained higher. Oilsands production is forecast to increase by 800 000 bpd by 2020, a level that will keep Canada among the largest sources of growth in global oil supply throughout that time. Canada is also expected to remain the third largest source of supply growth in the world, a position it has held since 2005.
Reasons for growth
IHS’ updated production forecast is 280 000 bpd less than a pervious outlook which was released prior to the collapse in crude oil prices, which now stand at roughly half the level of a year ago. However, regardless of lower oil prices, oilsands production is still expected to register strong growth through 2020 because:
- Projects that are already up and running are expected to continue to operate. IHS has estimated that, on an operating costs basis, existing oilsands mining and steam assisted gravity drainage (SAGD) in situ facilities would have required an average WTI breakeven price of US$42/bbl and US$30/bbl, respectively, still below oil prices at the time of the IHS analysis.
- A sizeable amount of projects already under construction will continue through to completion. Approximately 1 million bpd of oilsands production capacity existed in various stages of construction at the end of the first quarter of this year.
Kevin Birn, Director, IHS Energy said, “there is plenty of momentum, via projects already under construction, to support oilsands production growth through 2020 even in this new lower oil price environment. Beyond 2020, we expect oilsands growth will continue but the trajectory of growth depends on projects that have yet to come forward.”
Birn has also said that among the factors that could influence the timing and nature of fresh investment in new oilsands projects includes: the pace of the recovery of global oil prices, the impact of lower prices on the cost structure of competitive sources of supply, and the ability of governments and industry to maintain the relative competitive position of the oilsands.
Competitive pressures such as project costs, timing of non-rail transportation to new markets, and shifting fiscal terms in Alberta will help shape the longer term growth of the Canadian oilsands.
Edited from press release by Claira Lloyd