IHS Markit has released its outlook for Canadian oil sands production through 2026. IHS Markit expects large production growth through 2019 — making Canada the second largest source of global supply growth during that time. More modest but sustained growth is expected beyond 2019, with oil sands production at the end of 2026 around 1 million bpd higher than in 2017.
Oil sands production has proved resilient and has notched significant growth despite the collapse in oil prices three years ago. IHS Markit attributes this to decreasing costs in existing operations and higher utilization rates, as well as the completion of the projects being constructed at the time of the price collapse. A lack of material production declines from oil sands facilities — unlike other sources of supply — also makes growth more readily achieved than other forms of oil production.
These factors are expected to continue to drive large production additions through 2017 – 2019. Starting in 2019, additions will begin to slow. Growth will continue but at a slower pace because of the long aftershock of lower prices and falling investment since the 2014 price collapse. The long lead time of oil sands projects means the impact of lower oil prices will impact supply additions into the early part of the next decade.
“In recent years — even through lower prices — it was not uncommon for oil sands production additions to average more than 150,000 or even 200,000 bbl/day annually,” Kevin Birn, Energy Director for IHS Markit, said. “Following 2019, modest additions beneath 100,000 bbl/day may be more common through the early part of the next decade.”
IHS Markit continues to expect oil sands growth to be dominated by expansions of existing facilities, which are lower cost, quicker to construct and lower risk. More growth is also expected from existing operations as they minimize downtime and increase utilization.
However, the potential exists for further technological innovation to alter the course of oil sands production in the future, Mr Birn said. “The oil sands has always been a story of innovation, and it is too soon to rule out the potential for technology to change the game in the oil sands.”