By Chester Dawson
CALGARY, Alberta--Canada's crude oil output will continue to
grow over the long term but at a slower pace than previously
projected, reflecting many project postponements resulting from the
slump in oil prices, the country's main energy trade group
says.
The Canadian Association of Petroleum Producers on Tuesday said
it expects Canadian crude output--mostly from Alberta's oil
sands--to reach 4.96 million barrels a day by 2025. That forecast
is less than the previous estimate of 5.6 million barrels a day and
the 6.0 million barrels a day it had forecast back in 2013.
The latest projection, though, is still higher than the current
rate of 3.89 million barrels a day that the CAPP projects for crude
output this year on capital spending of 45 billion Canadian dollars
($36.3 billion). That is slightly above last year's output of 3.74
million barrels a day and a 40% drop in spending.
The lower forecast is the latest sign of a global retrenchment
in oil and gas investment that has hit the most expensive forms of
extraction the hardest, including oil sands and shale oil
production in North America.
For Canada, the slower growth may impact the broader economy
since energy is one of the primary drivers of exports and overall
economic growth. "It's almost exclusively driven by the lower crude
price," CAPP Vice President Greg Stringham said of the revised
growth forecast.
Crude-oil prices have fallen by more than a third from peak
levels a year ago due to a global supply glut. The price on the New
York Mercantile Exchange for U.S. oil futures for July delivery
rose $2.00, or 3.4%, on Tuesday to $60.14 a barrel. That was,
nonetheless, down from around $105 a barrel this time last
year.
The bulk of expected output gains will come from the oil sands
of northern Alberta, which accounted for 2.16 million barrels a day
last year and are expected to produce 3.51 million barrels a day by
2025, it said. Conventional oil production last year in Canada was
1.49 million barrels a day, and CAPP expects that to decline to
1.45 million barrels a day over the next decade.
The pace of Canadian production growth isn't expected to slow
much over the next five years, given the long-term production
profile of oil sands development and the huge upfront investments
many companies have already made. That sets it apart from shale oil
and more conventional production.
CAPP said it sees production rising to 4.64 million barrels a
day over the next five years, which is unchanged from its previous
estimate. "There's much more momentum in oil sands. The slowing in
the growth of production is five years out" or longer, CAPP's, Mr.
Stringham said.
A year ago, rapidly escalating construction costs, not tumbling
oil prices, were Canadian producers' biggest worry, prompting some
to shelve capital intensive investments in oil sands projects. The
drop in oil prices forced another and much larger round of
deferments targeting future oil sands production.
Most of the country's largest oil sands operators, including
Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy
Inc. and the Canadian units of Exxon Mobil Corp. and Royal Dutch
Shell PLC, announced plans earlier this year to indefinitely
postpone planned oil sands investments.
In an sign those oil sands project deferments may cast a long
shadow, CAPP also cuts its 15-year growth projections for a second
consecutive year. It now expects total Canadian output to reach
5.33 million barrels a day in 2030, down from its projection last
year for 6.4 million barrels a day by then and a 2013 estimate for
6.7 million barrels a day.
CAPP, which is the industry's leading lobby group in Canada,
called for increased pipeline and crude-by-rail capacity to ease
bottlenecks that threaten to further slow the pace of growth if
more Canadian oil can't get to global markets.
Write to Chester Dawson at chester.dawson@wsj.com
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