Alberta oilsands production outlook bright despite gloomy headlines

“It’s hard to imagine a scenario where oilsands production would go down,” says oilsands analyst Michael Dunn of GMP FirstEnergy.

In its budget announced Thursday, the Alberta government forecasts oilsands output will rise from 2.5 million bpd in the 2016-17 fiscal year to 3.3 million bpd in 2019-20.

Dunn says oilsands companies have dramatically cut operating costs per barrel over the last two years while oil prices have been low, and although it seems counterintuitive, one of the best ways to do that is by producing more barrels.

That’s why Canadian Natural Resources (TSX:CNQ) is buying most of Royal Dutch Shell’s oilsands assets while continuing to grow production at its Horizon oilsands mining project, Dunn said.

One thing no one worries about is availability of resource. The Alberta oilsands contain an estimated 1.8 trillion barrels of oil, about 168 billion barrels of which are considered recoverable using today’s technology.

At the end of last year, there were five oilsands mining operations and about 20 commercial thermal projects producing in Alberta.

More than 70 other greenfield or expansion oilsands projects, both mining and drilling operations, are waiting in the wings after winning regulatory approval but not yet receiving investment decisions from their proponents.

With production rising, pipeline capacity is expected to tighten over the next few years. That means more barrels will be placed in railcars until Enbridge Line 3 and Trans Mountain expansion, recently approved by the federal government, are built.

A potential limit to growth, however, is the environmental impact of oilsands development.

The Alberta government has set a 100-megatonne annual limit on emissions from the oilsands and the sector already emits about 70 per cent of that. New taxes on emissions are expected to increase over time.

In an upcoming study, however, the Canadian Energy Research Institute says new technologies — including the use of solvents to produce bitumen through wells with little or no water and lower energy use — could allow overall oilsands production to continue growing.

Growth in the oilsands isn’t inevitable, however, said Charlie Kronick, a London-based Greenpeace campaigner.

He said the oil industry assumes that it will always see higher prices, new pipelines, rising demand and favourable regulation.

“Actually, those things have all changed significantly from 2008,” he said. “A lot of those things are not just cyclical changes but have become structural.”

Follow @HealingSlowly on Twitter.

Dan Healing, The Canadian Press

by Canadian Press

Alberta oilsands production outlook bright despite gloomy headlines

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