Canadian oil sands production is expected to decline by nearly 175 000 bbl/d this year as a result of Covid-19, which will be the largest annual decline on record, says global analytics company IHS Markit.
It forecasts that the longer-term trajectory of oil sands production, however, is expected to return to pre-pandemic projections.
The 'IHS Markit Oil Sands Dialogue' report projects that Canadian oil sands production will reach 3.8-million bbl/d in 2030, which is nearly 1.1-million barrels a day higher than 2020 levels.
The previous IHS Markit forecast, prior to Covid-19, anticipated production would reach 3.9-million barrels a day in 2030.
The company says that, prior to Covid-19, the coming decade was already expected to be one of sustained-but-slower growth for oil sands, with transportation constraints weighing on new large-scale incremental investments – including a lack of adequate pipeline capacity and the resulting sense of price insecurity in western Canada.
“The impact of Covid-19 has changed the reason for a period of lower investment in the oil sands not necessarily the direction of long-term expectations,” explains IHS Markit senior analyst Celina Hwang.
She notes that recent reductions, albeit dramatic, are likely to be only temporary and curtailed output is expected to return.
Oil sands production is anticipated to rise over the back half of 2020 and into 2021 as curtailed production comes back on line and existing installed capacity that has never been fully utilized ramps up.
Should the Government of Alberta ease its regulated curtailment, by 2022 oil sands output could rebound from its Covid-induced declines to more than 300 000 bbl/d higher than 2019 levels.
“Production would then proceed along a trajectory close to prior expectations, with most production growth to 2030 coming from Covid-19 recovery and ramp-up of already existing production capacity.
“About half (over 500 000 bbl/d) of the rise in production is expected to come from incremental investments in new capacity—the majority of which will come from projects where some capital has already been deployed. Less than a third of anticipated growth to 2030 is expected to come from new projects that include entirely new greenfield operations or projects to expand existing facilities,” IHS Markit states.
The IHS Markit forecast finds that remaining uncertainties in the global recovery from Covid-19 and the status of western Canadian pipeline capacity could shift the trajectory of oil sands production in the future.
“But, previous projections for long-term production growth remain largely intact under current conditions.
“Despite the pandemic-induced shocks of 2020 the longer-term expectations for Canadian oil sands are not far off from what was expected prior to the pandemic,” confirms IHS Markit VP Kevin Birn.
“The scale of installed production capacity that exists today, the lack of material production declines from existing operations in the medium to long term and the ability to optimise and leverage current operations all support growth.”