Thursday, March 08, 2012
The Canadian crude oil industry will face substantial challenges and downward pricing pressure over the next five years as production from Alberta’s oil sands continues to skyrocket amid limited refining and transportation capacity.
EVERGREEN, CO (March 8, 2012) – BENTEK Energy, a leading energy markets information and analytics company, reports that Canadian crude oil production will grow 31% up to nearly 4 million b/d from 2011 through 2016, with almost all incremental supply being transported to the U.S. Midwest and Gulf Coast for refining. This will lead to a 42% or 917,000 b/d increase in Canadian crude exports to the U.S., impacting the already constrained refinery and transportation markets. The Canadian section of BENTEK’s Market Alert, Crude Awakening: Shale Boom Hits Oil, projects that Canadian crude oil production growth of nearly 1 million b/d in western Canada will stem predominantly from the Athabasca oil sands, Peace River oil sands and Cold Lake oil sands. A number of emerging unconventional oil plays also will add to this growth, including the Alberta Bakken, Cardium and Viking plays. All of this production will compete for pipeline space.
Canadian oil demand from refineries is expected to remain relatively flat during this time. The U.S. refining industry is expected to be the primary destination for Canada’s additional crude supply. However, five of the six major pipeline systems that move crude across the U.S.–Canadian border are either full or constrained, and pipeline takeaway capacity will be limited until new pipeline expansions come online. Several large Canadian pipeline expansions are planned, including the Keystone XL project, an expansion of Kinder Morgan’s Trans Mountain system and Enbridge’s Northern Gateway project.
“Canada is poised to deliver a substantial amount of crude to the U.S. However, it will be interesting to see if the U.S. market steps up with the necessary pipeline and refinery infrastructure needed to handle the supply,” noted BENTEK Senior Director, Energy Analysis, Adam Bedard. “The timing of pipeline expansions coming online will have a major role in impacting Canadian oil prices. Unless transportation constraints can be eliminated, these constraints will lead to deeply discounted Canadian oil prices over the next few years.”
BENTEK’s Market Alert, Crude Awakening: Shale Boom Hits Oil, provides a comprehensive review of the U.S. and Canadian oil market and its potential growth over the next five years, including industry challenges, implications and regional five-year production forecasts. The Canadian section of this Market Alert offers in-depth analysis on historical and projected Canadian crude oil supply growth, including trends in key oil sands areas and unconventional oil plays. Extensive analysis on existing and future Canadian transportation infrastructure, on pipeline flows to the U.S. and on refinery demand are also included, providing the most fundamental assessment of crude oil available in the marketplace today.
For more information about BENTEK’s Crude Awakening: Shale Boom Hits Oil Market Alert or BENTEK’s full line of Crude Oil Production Monitors, go to www.bentekenergy.com or call 1-888-251-1264.