Canadian crude output growth set to slow
Production is not falling in face of low oil prices, just likely to grow less quickly than projected
Canadian oil producers are putting on the brakes in the face of lower oil prices, with the Canadian Energy Research Institute predicting crude output growth will slow this year and next.
That doesn't mean Canada won't be producing more oil each year, though this development seems to contrary to the clear message the market is sending — there is a glut of oil worldwide; don't produce so much.
But so much new production was set to come online this year, from development last year when the oil price was in the $95 to $100 range, that Canadian producers are still seeing new output.
The CERI predicts Canadian output will grow by 41,000 barrels a day this year and 17,000 barrels a day in 2016, according to its president emeritus Peter Howard.
On Wednesday, West Texas Intermediate crude slipped 19 cents to $56.71 US a barrel, having held its price above the key rate of $50 for the past week. Canadian crude contract Western Canada Select was up $1.05 to $45.81 US.
CERI's March oil report puts Canadian output at 3.72 million barrels a day at the end of 2014, with production up 6.4 per cent last year.
Rigs fall idle
Canadian rigs seeking oil fell to 18 last month, from more than 400 in February 2014, according to data from Baker Hughes Inc., showing the impact of lower prices on conventional oil production.
But Howard explains that oilsands activity is on a different trajectory to conventional oil drilling.
"Here in Alberta it takes approximately six months to licence a well, drill a well and put it on stream. So if renewed licences are a barometer of the industry, the licences for the first 2 ½ months of this year are approximately off by about 40 per cent from last year," he said in an interview with CBC News.
He estimates conventional crude production will drop in real terms by 90,000 barrels a day this year and 177,000 barrels a day by 2016.
It could take to 2020 for conventional oil to come back to 2014 levels of output.
"The oilsands is in a different game. Oilsands we have projects that are under construction that you can't stop them – they're half or two-thirds completed," Howard said.
But oilsands production pushes Canadian output into positive territory and could power it higher beginning in 2018, depending on what oil prices do in the meantime.
CERI is projecting that oilsands output will expand by 130,000 barrels a day for each of the next four years.