Canada’s oil sands production will grow by 1 million barrels daily in the next decade above the current output of about 2.75 million barrels, driven mostly by the expansion of existing facilities rather than new projects, a new reports shows.
According to global consulting firm IHS Energy, the roughly 42% production increase will help Canada remain among the world’s largest oil suppliers.
Canada is part of the “G-5+2”— a group of low-cost Middle East oil-producing countries (the Gulf-5) plus the US and Canada. Collectively, IHS analysts say, they will account for most of the world’s oil supply growth in the next decade.
Most of the growth will have to come from so-called “brownfield” expansions where costs have come down as a result of lower construction activity, improved operating efficiencies and cheaper natural gas.
“We expect oil sands producers to focus future investments in the coming years onto their most economic projects – which we expect to be expansions of existing facilities,” Kevin Birn, director for IHS Energy, said in a statement.
“Expansions of existing facilities are better understood, quicker to first oil and lower cost to construct,” he added.
Since 2014, the cost of building and operating a new oil sands plant has fallen by $10 a barrel, and the least expensive project — expanding an existing thermal oil sands operation — could break even at a US crude price of around $50 a barrel, IHS estimates.
US oil for August delivery recently traded down 2.3% at $46.57a barrel on the New York Mercantile Exchange, after topping $50 a barrel earlier this month for the first time in nearly a year.
Monday’s fall would be oil’s fourth-largest daily decline since early May. Brent crude recently traded down 2.1% to $47.39 a barrel on ICE Futures Europe. Both are at one-week lows.