By OGJ editors
HOUSTON, Nov. 10 -- Although the oil sands industry will continue to develop in Alberta despite the jolt it received when oil prices plunged last year, total Canadian oil exports to the US face constraints, according to a study by the Center for Global Energy Studies, London, and Geopolitics Central, Calgary.
Oil sands production will increase by 1.19-1.99 million b/d during 2009-20, depending on the degree of economic and environmental cooperation among major countries, the study says.
Cooperation extensive enough to keep the global recession relatively short and ensure strong and lasting growth afterward would support oil prices and enable oil sands production in Alberta to rise from 1.21 million b/d in 2008 to 3.2 million b/d in 2020.
The production growth in that scenario would occur despite high costs related to economic strength in Alberta and rising outlays for environmental mitigation, the study says.
In an alternative scenario, competition among major economic powers prolongs the recession, leads China and Russia to challenge Western powers for dominance, and produces a second economic dip in 2010 with subsequent growth slower than in the recent past.
In the lower-growth scenario, oil prices below those in the alternative set of assumptions restrict growth in Albertan oil sands production in 2020 to 2.4 million b/d. The increase occurs because of projects in progress, lower costs, and gradually rising oil prices.
The study notes a preference by project operators for upgrading of bitumen outside Alberta because of cost advantages elsewhere. But in the higher-growth scenario, the provincial government legislates that new projects by 2015 upgrade all bitumen in Alberta. In the lower-growth scenario, this isn’t an option because light-heavy price differentials are too narrow.
As a result, 82% of new bitumen production is upgraded in Alberta with high growth, half that amount with lower growth.
The main market for incremental oil sands supply through 2020 is Northeast Asia, where refineries prefer lighter grades of crude.
In the low-growth scenario, the main market for new oil sands supply is the US, chiefly the eastern Midwest. But total exports to the US are limited to “a relatively small increase” by a “relatively large decline” in Canada’s conventional oil production, the study says.