CALGARY – A U.S. research organization says Canada’s oilsands companies will gradually switch from new projects to expansion of existing operations as production grows over the next nine years to 3.4 million barrels a day from 2.4 million at present.
Kevin Birn, director for IHS Energy, said Monday that construction of new oilsands projects approved by before the fall in oil prices in 2014 will add 600,000 barrels a day of production by 2020.
Another 400,000 barrels per day will then be added by 2025 as companies focus on their most economic projects, primarily expansions of existing operations, he said.
“Expansions of existing facilities are better understood, quicker to first oil and lower cost to construct,” said Birn. “It is less risk at a lower cost.”
“As we saw with tight oil producers, when prices collapsed, they focused their activity on the most productive areas. We expect a similar experience to play out in the Canadian oilsands. However, given the nature of the long lead times, we expect this will play out over the coming decade.”
Some oilsands producers are already putting the strategy in play.
Producer MEG Energy (TSX:MEG), for instance, chopped its capital spending budget in 2015 by $600 million in reaction to low oil prices. It put on hold new projects it had planned to build but vowed to continue to grow production more slowly through “incremental brownfield expansions” and implementation of new technologies at its existing Christina Lake oilsands facility.
Last week, the Canadian Association of Petroleum Producers predicted that Canadian oilsands production would grow to 3.7 million barrels a day by 2030.
The represented a reduction due to the prolonged period of low oil prices from its year-earlier prediction of four million barrels by 2030.
CAPP estimates that investment by producers in the oilsands will fall to $17 billion this year from $23 billion in 2015 and $34 billion in 2014. It says the oil price crunch has resulted in the loss of 110,000 direct and indirect jobs related to the industry in Canada.
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