Canadian oil sands producers hike output despite dim crude price
Oil companies in Canada, the world’s fifth-largest crude producer, are not showing any signs of cutting down output, despite fuel prices more than halving in the past six months.
According to Bloomberg data, production in the country is expected to grow 3.5% this year, as a low dollar is making the extraction process cheaper than in the past years:
Oil sands supply is growing even as the number of rigs drilling for oil in the U.S. has fallen to the lowest in almost four years.
Prices would have to stay between $30 and $35 a barrel for at least six months, down from about $50 now, before wells shut, according to the Canadian Energy Research Institute.
But some major players, such as Canadian Natural Resources (TSX:CNQ), disagree. According to its president, Steve Laut, the “made in Fort McMurray cost” of doing business has risen too quickly and must end.
Laut, reports The Globe and Mail, said that oil sands producers were making three times the profit in 2004 when a barrel of oil hit about US$40 than it did when the price reached nearly $100 in 2013.
He argues that plummeting oil prices are an “opportunity” for every part of the industry to cut costs and eliminate inefficiencies in order to successfully compete with the U.S. fracking industry. If nothing is done to reduce oil sands costs, he adds, the industry could be doomed.
Recent figures from the National Energy Board show that Canada’s output is set to climb to 3.89 million barrels a day this year, mostly driven by oil sands producers, whose output will increase 8.3% (upgraded synthetic crude included). Conventional crude and condensate supply, instead, will fall 3%.