Canadian oil sands production is expected to rise for a 25th consecutive year in 2026, reaching a record 3.5 million b/d as operators continue to optimize existing installations, according to S&P Global Energy.

The forecast represents an increase of about 100,000 b/d, or 3%, from 2025. S&P Global expects production to reach about 3.9 million b/d by the early 2030s before broadly plateauing under its current outlook.

Oil sands production has expanded steadily over the past quarter century. Annual output stood at about 300,000 b/d in 2001 and has increased every year since then except in 2020, when production was affected by the COVID-19 pandemic.

Most of the anticipated 2026 growth is set to come from optimization of existing operations rather than major new projects. Much of Canada's current oil sands capacity was built between 2009-18, while construction of large, new installations has been limited in recent years.

S&P Global said, however, that the potential for renewed interest in capacity additions through new construction is creating additional upside to the longer-term outlook.

“The Canadian oil sands has proven to be a resilient source of supply despite periods of low oil prices, regional price volatility and uncertainty over future Canadian energy and climate policy,” said Kevin Birn, chief Canadian oil markets analyst at S&P Global Energy. “The question today is not whether the oil sands will continue to grow, but rather how much additional growth could come should new projects once again come forward.”

Factors contributing to that outlook include announced plans for expanded pipeline export capacity, greater clarity, reduction, and extension of carbon pricing through 2040, commitments to accelerate reviews of projects considered to be in the national interest, and potential changes to fiscal terms for new oil sands projects.

S&P Global also said Canadian energy production is increasingly being viewed as a source of national security and economic growth amid the deterioration in Canada-US trade relations over the past 18 months.

“The degree of alignment to drive upstream growth between the Canadian federal and provincial governments has not been seen in more than a decade,” Birn said. “The fresh focus on eliminating uncertainties to accelerate investment could set the stage for a return to new construction and greater growth.”

Major hurdles remain. New oil sands projects are capital intensive, require long lead times, and will depend on project competitiveness and shareholder willingness to commit capital.

S&P Global said details of the final implementation agreement related to the Canada-Alberta memorandum of understanding, expected Nov. 15, 2026, between the governments of Alberta and Canada and the oil sands industry will be an important indicator for the longer-term outlook.

Under its current outlook, S&P Global expects oil sands production to level off at roughly 3.9 million b/d in the early 2030s. The firm said there is potential for faster growth if new projects move ahead.

S&P Global estimates that previously proposed projects that did not advance could provide nearly 500,000 b/d of incremental production capacity beyond what is included in its current outlook.

“This estimate is what we expect would be the most attractive and expedient projects,” said Celina Hwang, director of Canadian crude oil markets at S&P Global Energy. “Given the right conditions and time, the potential could be greater.”