Canada oil sands output seen beating projections

Thu May 17, 2012 5:41pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Production in the Canadian oil sands is likely to increase at a much faster clip than the industry currently projects, an analyst said, putting more pressure on pipeline companies to vastly expand capacity out of Alberta.

The forecast comes as companies plot billions of dollars worth of new pipeline routes to stave off costly bottlenecks. The latest is Enbridge Inc's plan, announced Wednesday, to spend C$3.2 billion ($3.15 billion) on pipelines, most of it to get crude from Alberta to Eastern Canada.

Andrew Potter, analyst at CIBC World Markets, said he expects production from the oil sands of northern Alberta, the world's third biggest crude resource, to jump to 2 million to 2.5 billion barrels a day by 2020 from last year's output of 1.6 million bpd.

That compares with the last forecast from the Canadian Association of Petroleum Producers, an often-cited study, of an increase of 1.4 million bpd. CAPP is expected to release its 2012 forecast in the coming weeks.

In a report, Potter said CAPP's current outlook appears conservative, based on the number and size of projects now under construction and those that he said have a high likelihood of being sanctioned by well-funded developers.

Under his scenario, overall oil sands production, from both mining and steam-driven projects, could climb to as much as 4.1 million barrels a day in eight years, 37 percent more than under the CAPP outlook.

"While long-term company forecasts are inherently optimistic, as, in reality, financing, inflation and crude oil price volatility wreak havoc with the best-intentioned plans, this is, nonetheless, a considerable gap," he wrote.

His forecast averages out to gains of 220,000 bpd-270,000 bpd each year, a figure that is between CAPP's forecast and companies' own, often optimistic, expectations.   Continued...