chinaman711
06-06-2006, 08:40 AM
Oil Sands Set to Explode
By Robert Aronen
June 5, 2006
Rising energy prices are driving oil sands production to new heights. Last week, Canada's National Energy Board (NEB) released a report giving an update on the opportunities and challenges facing Canada's oil sands between now and 2015. (Link opens a PDF.) A follow-up to a 2004 report, the document takes into account current market conditions, such as the doubling of the price of crude oil and natural gas since the original report came out. We've given our own report on Canada's oil sands, but now let's take a revised look, based on the new NEB report.
Oil sands production
Capital expenditures to fund oil sands development have exploded in the past two years. Current investment totals $106 billion ($125 billion Canadian) to develop projects that will be completed between 2006 and 2015. If all of these projects are completed, oil sands production in 2015 will total a high estimate of 4.4 million bpd (barrels per day), up from 1.1 million bpd in 2005. Assuming that even 75% of the high estimate is achieved, production will increase to 3 million bpd.
That much expansion will place Canada among the world's top oil producers and exporters. As things stood in 2004, Canada ranked eighth among world oil producers and didn't even make the list of the top 14 exporting countries. This was back when it produced just in excess of 3.1 million bpd, with 1 million bpd coming from the oil sands. Assuming that conventional production remains near 2 million bpd, Canada will be producing 5 million bpd in 2015 -- enough to place Canada fourth in global oil production.
These estimates assume that Iran is unable to increase production by more than 1 million bpd, but I consider this assumption reasonable, since Iran is having difficulties meeting its OPEC quota, and its government has created an environment inhospitable to the type of foreign investment needed to boost production.
In exports, oil sands production will have a much more significant impact for Canada. In 2004, Canada's oil consumption was 2.3 million bpd, resulting in net exports of only 800,000 bpd. I estimate that Canada will consume around 2.7 million bpd in 2015, assuming annual growth of 1.6%. With 5 million bpd of production, net exports will total 2.3 million bpd. Returning to our table of Top World Net Exporters, we thereby find that Canada will move into the top 10 exporting countries by 2015. If oil sands production meets the high estimate, Canada could move as high as third place among exporters, behind only Russia and Saudi Arabia.
Producers
It should be no surprise that the major oil sands producers have announced the largest expansion projects:
Company
Total Production (bpd)
Year Complete
Suncor (NYSE: SU)
500,000 to 550,000
2010 to 2012
EnCana (NYSE: ECA)
500,000
2016
Canadian Natural Resources Limited (NYSE: CNQ)
800,000
Not announced
Other large projects have been announced at Imperial Oil, Shell Canada, Petro-Canada (in partnership with UTS Energy and Teck Cominco), Husky Energy, and a whole host of other companies, including Shell EP Americas, which recently shocked the oil sands by purchasing 10 properties in northern Alberta.
By Robert Aronen
June 5, 2006
Rising energy prices are driving oil sands production to new heights. Last week, Canada's National Energy Board (NEB) released a report giving an update on the opportunities and challenges facing Canada's oil sands between now and 2015. (Link opens a PDF.) A follow-up to a 2004 report, the document takes into account current market conditions, such as the doubling of the price of crude oil and natural gas since the original report came out. We've given our own report on Canada's oil sands, but now let's take a revised look, based on the new NEB report.
Oil sands production
Capital expenditures to fund oil sands development have exploded in the past two years. Current investment totals $106 billion ($125 billion Canadian) to develop projects that will be completed between 2006 and 2015. If all of these projects are completed, oil sands production in 2015 will total a high estimate of 4.4 million bpd (barrels per day), up from 1.1 million bpd in 2005. Assuming that even 75% of the high estimate is achieved, production will increase to 3 million bpd.
That much expansion will place Canada among the world's top oil producers and exporters. As things stood in 2004, Canada ranked eighth among world oil producers and didn't even make the list of the top 14 exporting countries. This was back when it produced just in excess of 3.1 million bpd, with 1 million bpd coming from the oil sands. Assuming that conventional production remains near 2 million bpd, Canada will be producing 5 million bpd in 2015 -- enough to place Canada fourth in global oil production.
These estimates assume that Iran is unable to increase production by more than 1 million bpd, but I consider this assumption reasonable, since Iran is having difficulties meeting its OPEC quota, and its government has created an environment inhospitable to the type of foreign investment needed to boost production.
In exports, oil sands production will have a much more significant impact for Canada. In 2004, Canada's oil consumption was 2.3 million bpd, resulting in net exports of only 800,000 bpd. I estimate that Canada will consume around 2.7 million bpd in 2015, assuming annual growth of 1.6%. With 5 million bpd of production, net exports will total 2.3 million bpd. Returning to our table of Top World Net Exporters, we thereby find that Canada will move into the top 10 exporting countries by 2015. If oil sands production meets the high estimate, Canada could move as high as third place among exporters, behind only Russia and Saudi Arabia.
Producers
It should be no surprise that the major oil sands producers have announced the largest expansion projects:
Company
Total Production (bpd)
Year Complete
Suncor (NYSE: SU)
500,000 to 550,000
2010 to 2012
EnCana (NYSE: ECA)
500,000
2016
Canadian Natural Resources Limited (NYSE: CNQ)
800,000
Not announced
Other large projects have been announced at Imperial Oil, Shell Canada, Petro-Canada (in partnership with UTS Energy and Teck Cominco), Husky Energy, and a whole host of other companies, including Shell EP Americas, which recently shocked the oil sands by purchasing 10 properties in northern Alberta.