Canadian crude oil production is expected to continue to rise until 2025 followed by a decline by yearend 2039. That was the conclusion of a recent study released by the Canadian Energy Research Institute on the outlook for Canada’s conventional crude oil and natural gas industries and the economic impacts of the industry on the Canadian and US economies.
The 2014-18 pricing environment led to a 200,000-b/d reduction in production from that reversed in 2016. The study expects production growth until 2025 reaching 1.4 million b/d (without pentanes plus and condensate) followed by a decline to 1.3 million b/d due to falling production in Newfoundland and Labrador by the end of 2039.
Growth in crude oil production will be led by Alberta followed by Saskatchewan. Together with Saskatchewan, Alberta is affected most by the dwindling US imports in the coming years. After 2030 exports to the US rise due to the decline in production from their maturing shale fields.
The study covers onshore and offshore conventional oil, including shale and tight oil activity, conventional gas, coalbed methane, tight and shale gas, and the associated natural gas liquids (pentanes plus and condensate only). It does not include oil sands.
In this study, the overall oil outlook is shaped based on several factors: the dynamics of the US crude imports (declining before 2030 and growing afterwards), relatively stable demand from domestic refineries, the pentanes plus and condensate’s growth underpinned by the demand from oil sands, the additional pipeline exports to central Canada to displace foreign oil, and additional exports via the Trans Mountain Pipeline. The outlook for gas is formed based on the expectations of additional domestic gas consumption, declining net exports to the US, and the additional demand for gas from LNG developments.
Total production of pentanes plus and condensate will keep increasing for the forecasted period from 418,000 b/d in 2019 to 604,000 b/d in 2039, underpinned by demand from oil sands and driven by liquids-rich gas drilling.
For gas, an incremental trend in production in recent years was caused by addition to the net exports to the US by 0.4 bcfd and an increase in domestic gas consumption. However, the net exports to the US started to decline in 2017 and are expected to continue for the foreseeable future. Growth in domestic demand by 2.5 bcfd in the next 20 years will largely, but not completely, counterbalance this decline of net exports. The domestic incremental demand is expected to come from the electricity market, which explains 47% of growth, followed by industry which drives 35% of gas demand additions including by the oil sands sector.
LNG plants provide an opportunity to develop production capacity in western Canada and attract more growth-oriented investments into the upstream gas industry. Such a scenario will lead to a consistent increase in production until 2029 to levels slightly over 25 bcfd. Post-2029, production will stabilize through the remainder of the study period. The gas for LNG will constitute 30% of total Canadian production by 2039 and is expected to be supplied by British Columbia and Alberta.
Economic, environmental impacts
For the forecast period of 2019-29, it is estimated that the total US gross state product impact (direct and indirect) will amount to almost $19.6 billion or $26.2 billion (Can.). The total employment impact (direct and indirect) is measured in creating or preserving 153,200 full-time equivalent jobs in the 11-year period.
The study also forecast carbon dioxide equivalent emissions from oil and gas upstream activities. On average, emissions from oil production will be 31.1 million tonnes/year during the study period, or less than 1% below the 2017 level. Alberta and Saskatchewan will generate the highest emissions at 48% and 35%, respectively. For gas production, the average emissions will be 44.7 million tpy over 2019-39—a 10% decrease compared to 2017 levels due to methane reduction regulation implementation. Alberta and British Columbia will generate the highest emissions at 57% and 15%, respectively.
