As OPEC glares at the surge in US shale production that is threatening to derail its attempt to balance the oil market, it may also want to cast an eye north, the Financial Times reported.
Canada, home of the world’s third-largest oil reserves, might have seen producers slash capital spending during the three-year-old oil decline, but earlier investments in the country are set to keep pushing output higher for at least the next 18 months.
A forecast released this month by the Canadian Association of Petroleum Producers sees the country’s output increasing by 270,000 barrels a day in 2017 and another 320,000 b/d next year.
That combined two-year Canadian increase is equal to almost a third of Opec’s production cuts that it made with allies like Russia at the beginning of this year in an effort to raise prices.
Kevin Birn, senior director at IHS Markit, says that over the next few years Canadian growth “will only be surpassed by the United States and its tight oil machine,” referring to the US industry’s unlocking of tightly packed oil deposits in shale and similar rocks.
Much of that Canadian oil is already pouring into storage tanks in the US, rattling traders who last week pushed prices to a half-year low.
The acceleration in Canadian production in spite of low global oil prices reflect the economics of the oil sands of Alberta, the heart of the Canadian petroleum industry.
Beneath the region’s boreal forests lies bitumen, a sticky hydrocarbon that is strip-mined or extracted with steam. New projects require years of planning and billions of dollars of investment, but plod forward once begun. Projects authorised when crude was still $100 a barrel are opening now.
In the oil sands, new projects set to open this year include the Fort Hills mine operated by Suncor, which will eventually reach peak volumes of almost 200,000 b/d and run for the next half century. The Canadian Natural Resources company is expanding its Horizon oil sands mine by 80,000 b/d.