After years of stagnant growth, a prominent New York financial research house is raising its long term outlook for Alberta’s oil sands production for the first time in half-a-decade, although federal government environment policies could threaten that vision..In its 2023 Oil Sands Outlook, S&P Global Commodity Insights is projecting Canadian oil sands output to hit 3.7 million barrels per day (bpd) by 2030, up more than half a million bpd from today and 140,000 bpd higher than its previous forecast in 2022. It was the first upward revision in more than five years, it said..Although it’s “relatively minor in the grand scheme of things” at 2.5%, “even a small percentage represents a significant volume.“.As opposed to new greenfield projects or mines, S&P said most of the gains — upwards of 90% — will be the result of optimization of existing operations and higher efficiency which means the era of the mega project is likely over..“The Canadian oil sands have entered an ‘era of optimization’,” said Kevin Birn, S&P’s VP and chief markets analyst of Canadian oil markets. .The projections expect Canada to continue to post record crude oil production in both oil sands and conventional crude, topping four-million bpd after 2030, and annual export levels to climb for the remainder of this decade. .That would put Alberta firmly among the four largest oil producers in the world, behind the US, Saudi Arabia and Russia, but well ahead of all other OPEC members including Iraq, Iran, the UAE and Kuwait..Growth is expected to slow after that, however, but a very shallow decline only begins to emerge in the early 2030s due to the long, flat production profile of oil sands assets..The report notes oil sands-related capital expenditures rose to the highest level in 2022 since 2015 and could rise higher still in 2023 due to a more favourable long term oil price outlook. But it further notes that new investments have been slow in coming and are unlikely to include any major new projects..“Although producers continue to demonstrate capital discipline, stronger balance sheets are now giving oil sands companies renewed confidence in regard to their intentions for capital spending,” added Celina Hwang, S&P Global’s director of North American Crude Oil Markets..Continued upside potential exists for the production outlook given the organic nature of how optimization projects emerge, and could push those projections higher, the analysis says. .However, the biggest downside risk remains government environmental policies, especially at the federal level which is seeking to place an absolute cap on oil sands emissions that could translate into a de facto production cut. The federal government further mandated the oil industry to slash overall emissions some 40% by 2030 and reach net-zero by 2050..“If the emissions targets prove too stringent, and unattainable by the industry, then further investment — however modest — could be at risk,” S&P said.
After years of stagnant growth, a prominent New York financial research house is raising its long term outlook for Alberta’s oil sands production for the first time in half-a-decade, although federal government environment policies could threaten that vision..In its 2023 Oil Sands Outlook, S&P Global Commodity Insights is projecting Canadian oil sands output to hit 3.7 million barrels per day (bpd) by 2030, up more than half a million bpd from today and 140,000 bpd higher than its previous forecast in 2022. It was the first upward revision in more than five years, it said..Although it’s “relatively minor in the grand scheme of things” at 2.5%, “even a small percentage represents a significant volume.“.As opposed to new greenfield projects or mines, S&P said most of the gains — upwards of 90% — will be the result of optimization of existing operations and higher efficiency which means the era of the mega project is likely over..“The Canadian oil sands have entered an ‘era of optimization’,” said Kevin Birn, S&P’s VP and chief markets analyst of Canadian oil markets. .The projections expect Canada to continue to post record crude oil production in both oil sands and conventional crude, topping four-million bpd after 2030, and annual export levels to climb for the remainder of this decade. .That would put Alberta firmly among the four largest oil producers in the world, behind the US, Saudi Arabia and Russia, but well ahead of all other OPEC members including Iraq, Iran, the UAE and Kuwait..Growth is expected to slow after that, however, but a very shallow decline only begins to emerge in the early 2030s due to the long, flat production profile of oil sands assets..The report notes oil sands-related capital expenditures rose to the highest level in 2022 since 2015 and could rise higher still in 2023 due to a more favourable long term oil price outlook. But it further notes that new investments have been slow in coming and are unlikely to include any major new projects..“Although producers continue to demonstrate capital discipline, stronger balance sheets are now giving oil sands companies renewed confidence in regard to their intentions for capital spending,” added Celina Hwang, S&P Global’s director of North American Crude Oil Markets..Continued upside potential exists for the production outlook given the organic nature of how optimization projects emerge, and could push those projections higher, the analysis says. .However, the biggest downside risk remains government environmental policies, especially at the federal level which is seeking to place an absolute cap on oil sands emissions that could translate into a de facto production cut. The federal government further mandated the oil industry to slash overall emissions some 40% by 2030 and reach net-zero by 2050..“If the emissions targets prove too stringent, and unattainable by the industry, then further investment — however modest — could be at risk,” S&P said.
