The claim that building more pipelines to carry Canada’s oil sands production to ports for export will unlock significantly higher prices for bitumen is not supported by either past or current market conditions, a new study shows.
According to Jeff Rubin, senior fellow at the Centre for International Governance Innovation, overseas markets pay even lower prices for bitumen than in North America, so there is no economic case for additional pipeline capacity to tidewater or expanded oil sands production.
In his report, Rubin says that global agreements to reduce global carbon emissions over the next three decades will also reduce the size of future oil markets, not to mention the emerging push for electric vehicles.
As expected, the government of the province of Alberta, Canada’s oil sands production central, disagrees.
“It has never been more important for us to get new pipelines built,” Premier Rachel Notley said Thursday at the ribbon-cutting ceremony for a $1.6 billion expansion project led by Japan Canada Oil Sands.
She said she believed that more pipelines are needed to tap deeper into the growing Asian economies. Currently, about half of Canada’s oil exports are destined to the US, but the country is working on breaking the land lock condition and so expand its shipments to new markets.
Another study released by the International Energy Agency (IEA) stresses the need to find alternative ways to channel oil sands production towards new markets.
In its monthly oil report released Wednesday, the Paris-based agency says Canada’s oil output could edge closer to the 5 million barrel-per-day milestone next year.
The country’s total oil production is predicted to increase by 290,000 bpd this year, and by another 200,000 bpd in 2018 to reach 4.95 million bpd, and could surpass 5 million bpd in the second half of the year.
Canada’s oil sands output has increased in recent year as projects that were commissioned years ago have come online. And if the momentum continues, the IEA says, the nation could displace Iraq as the world’s fourth largest producer after the US, Russia and Saudi Arabia.
Alberta’s oil sands hold the world’s third-largest crude reserves, but they are also among the most expensive operations due to their remote location and energy-intensive production methods.