Replacement pipe is stored near crude oil storage tanks at Kinder Morgan’s Trans Mountain Pipeline terminal in Kamloops, B.C., in this file photo. (CHRIS HELGREN/REUTERS)
Canada’s oil sands industry will chop spending for a third consecutive year as weak prices and pipeline capacity shortages stoke uncertainty about future growth, a major industry forecast said Tuesday.
The Canadian Association of Petroleum Producers said new regulations in Canada, including policies aimed at reducing planet-warming greenhouse gases, are becoming more stringent and costly, raising competitiveness concerns for the sector as the United States under President Donald Trump rolls back environmental rules crafted by his predecessor. The industry lobby group says pipeline constraints to get oil to key markets continue to be one of its biggest challenges.
Major projects facing political and environmental resistance include Kinder Morgan Inc.’s Trans Mountain proposal and Enbridge Inc.’s Line 3 to the U.S. Midwest. Both were approved by Prime Minister Justin Trudeau last year.
In its annual forecast, CAPP said spending in the oil sands industry is poised to fall to $15-billion this year, down from roughly $17-billion last year and $34-billion in 2014. This longer-term forecast for the oil sands, which provides most of Canada’s production growth, is relatively unchanged from the association’s 2016 outlook. Production is set to increase to 2030 until it reaches 3.7 million barrels per day, from the current 2.4 million.
“Generally, the forecast has a higher rate of growth up to 2020 than in the latter years, which is supported by projects that have recently been completed or are already under construction,” notes the report.
The association predicts drilling for conventional crude will increase 70 per cent from 2016 levels, but will still be 40 per cent lower than in 2014. In the longer term, conventional drilling is in a state of decline to 2020, with flat production thereafter, says the report.
CAPP notes that investment in light tight oil is expected to lead to further growth but is at such an early stage that it is not reflected in the forecast.