Canada oil output will double by 2030, if pipelines built

By Edward Welsch
Bloomberg News

Canada’s crude output will more than double to 6.7 million barrels a day by 2030, provided new pipelines such as Keystone XL are built to transport growing oil-sands production, an industry group representing the country’s petroleum producers said.

Crude from the oil sands, the largest component of Canadian output, will rise to 5.2 million barrels a day by 2030 from 1.8 million currently, the Canadian Association of Petroleum Producers said in its 2013 annual forecast. The group boosted its overall estimate for Canada by 500,000 barrels a day from a 2012 outlook.

“The biggest potential risk is not having enough transportation capacity in time to enable this forecast to go ahead,” Greg Stringham, CAPP’s vice president of markets and oil sands, said in a phone interview from Calgary.

Popularity contest: Industry poll finds broad public support for Keystone XL

Canada holds the world’s third-largest oil reserves, behind Saudi Arabia and Venezuela, and is the sixth-largest oil producer in the world, according to the BP Statistical Review of World Energy. The majority of the reserves are held in the oil sands in northern Alberta.

The outlook, based on data provided to CAPP by producers about their planned output and price forecasts, hinges on the construction of controversial pipelines such as TransCanada Corp.’s Keystone XL conduit from Alberta’s oil sands to the U.S. Gulf Coast and Enbridge Inc.’s Northern Gateway from Alberta to the port city of Kitimat, British Columbia.

Keystone Pipeline

Keystone is particularly important because the space available to transport Alberta’s rising output via rail and pipelines, such as Enbridge’s Mainline, is already “tight,” Stringham said.

“It’s only small amounts of rail and small amounts of expansion on Enbridge that are going to help us through the next two years, which are going to be very tight,” Stringham said. Capacity constraints will continue until 2017, when the next proposed pipelines are scheduled to come online, if Keystone is delayed beyond its 2015 construction target.

Moving on up: Canadian refineries taking more U.S. crude

Keystone is opposed by environmental groups who don’t want to see more exports from Alberta. U.S. President Barack Obama will decide on the $5.3 billion Keystone XL this year, John Hoeven, a Republican senator from North Dakota and supporter, said in March after a meeting with the president and other Republican lawmakers.

The construction of Keystone “may hold us off for a couple of years,” then other pipelines will have to be built, Stringham said.

Pipeline Capacity

Pipeline capacity provided by Enbridge’s Northern Gateway project and Alberta Clipper expansions, Kinder Morgan Inc.’s Trans Mountain expansion and TransCanada’s Energy East pipeline will meet transportation needs until about 2025, the group estimated. After that, more than 1 million barrels a day of additional space will be needed to reach the 2030 forecast.

Some of those pipelines also face opposition. The government of British Columbia said last week it’s not satisfied that Northern Gateway has planned enough measures to respond to potential oil spills.

Market shift: U.S. crude output exceeds imports for first time in 16 years

Alberta’s oil output growth would be curtailed if new pipelines aren’t built, Bill Gwozd, a Calgary-based analyst with Ziff Energy Group, said in an e-mail today.

“Without any new pipelines, oil production peaks at 3.3 million barrels of oil a day, half of what CAPP is forecasting,” Gwozd said. “The pipelines are critical.”

Increased Forecast

Markets for Canada’s growing heavy oil production will primarily be found in the U.S. Midwest and Gulf Coast, with the opportunity for new markets in Asia, CAPP’s report said. Some output can also displace overseas oil imports at refineries in Quebec and on the U.S. West Coast, the organization said.

By 2020, Canadian producers could potentially supply an extra 1 million barrels a day to the Gulf Coast and an additional 460,000 barrels a day to the Midwest because of crude conversion projects at refineries there, CAPP said.

Some 700,000 barrels a day of crude imports at plants in Quebec and Atlantic Canada could also be displaced by growing domestic supplies, CAPP said. Declining overseas sources currently supplying Washington state and California could also be replaced by Canadian supplies.

Canada could also tap into increasing oil demand in Asia, including China and India, CAPP said. Canadian regulators are reviewing plans for the Northern Gateway pipeline and the Trans Mountain expansion, both of which may send Alberta crude to British Columbia for shipment to Asia.