HOUSTON – Canadian oilsands growth will probably come to a “standstill” after the projects under construction seriously stream as heightened environmental concerns, lack of pipeline access and policy changes slow investment, warned the International Energy Agency.
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“We will probably see continued capacity increases (in) the near term, with growth slowing considerably, if not creating any complete standstill, following the projects being built are completed,” the IEA said in its Medium-Term Oil Market report published Monday.
Canada is anticipated to boost production by around 100,000 barrels per day this year with a lot more quantities of 285,000 and 220,000 bpd coming online in 2017 and 2018, respectively, as projects such as Fort Hills, the Suncor-Energy Inc.-led oilsands project, and Hebron, the New england offshore joint-venture development, commence production.
But past the projects planned during the era of high oil prices, 2019 and 2020 will each see Canadian crude output rising with a mere 35,000 bpd.
“While some information mill currently running with negative operating cash costs, no major shut-ins or plant closures have been announced up to now,” the IEA said.
By 2021, Canadian oil output is forecast to average 5.Two million bpd, of which bitumen output from Alberta makes up about nearly 3.4 million bpd, or two-thirds of total supplies.
In 2016, we are living in probably the first truly free oil market we have seen because the pioneering times of the industry
The slowdown in Canadian production is part of a bigger “plunge” in global oil production that poses supply security risks for the world, as companies slash investments to weather oil prices of around US$32 per barrel.
“It is easy for customers to be lulled into complacency by ample stocks and low prices today, but they should heed the writing on your wall: the historic investment cuts we are seeing raise the likelihood of unpleasant oil-security surprises in the not-too-distant-future,” said IEA executive director Fatih Birol, launching the report at IHS CERAWeek event.
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Global supply has to rise three million bpd annually, just to take into account decline being produced, along with 1.Two million bpd to accommodate annual increase in demand, Birol said. Pressure when needed will push prices up US$80 per barrel by 2020, Birol said.
The Paris-based energy watchdog forecasts just over 4.A million bpd of crude oil contributing to the worldwide supply till 2021, compared to 11 million bpd between 2009-2015. The industry is anticipated to cut spending by 17 per cent this season, to increase the 24 per cent decline last year.
The IEA now expects the markets to balance themselves only in another year’s time, as demand finally catches up with a persistent supply glut.
“Only in 2017 will we finally see oil demand and supply aligned but the enormous stocks being accumulated will behave as a dampener on the pace of recovery in oil prices once the market, having balanced, then begins to draw down those stocks,” the IEA said.
Unless there is an even bigger than expected fall in non-OPEC oil production in 2016 and/or a significant demand growth spurt it’s “hard to determine oil prices recovering significantly in the short term” from their low levels, the IEA said.
“In 2016, we live in perhaps the first truly free oil market we have seen since the pioneering times of the,” the IEA said, with oil producers maximizing production with little consideration for price.
U.S tight oil production will decline by 600,000 bpd this year and the other 200,00 bpd in 2017, however it’s unlikely to spell no more the shale revolution in that country, the IEA noted.
Despite the U.S lifting its oil export ban, in The united states only Canada is anticipated to determine a notable uptick in shipments as producers increasingly target Asian markets.
The additional Canadian exports are not determined by the construction of either Kinder Morgan Inc.’s Trans Mountain expansion or Enbridge Inc.’s Northern Gateway or even TransCanada Corp’s Energy East pipeline, the IEA said.
“Rather, crude will follow existing routes to Asian markets where small volumes have already reached OECD Asia Oceania, China and Other Asia,” the IEA said.
Even as global oil supply starts plunging, global demand continues to accelerate, rising to 100 million bpd by 2020, when compared with 94.4 million bpd in 2015.
But new climate change policies and focus on energy efficiency in many key countries could revise that demand outlook downwards, Birol noted.
yhussain@nationalpost.com
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