Canada ramps up oil production
It will increase by 8% over the next 2 years.
A busy oil sands maintenance season and wildfires in early summer reduced Canadian oil production in the second quarter of this year. However, oil companies have been picking up the pace of growth recently, and analysts estimate that total Canadian production will grow by almost 8% over the next 2 years.
That is, oil production will increase by about 375 thousand barrels per day. This is more than what Canada, as the world's fourth largest oil producer, has been able to increase over the past 5 years.
According to the Canada Energy Regulator, Canada's average oil production in 2022 was 4.86 million bpd. In 2018, this indicator was equal to 4.61 million barrels.
Oil sands producers Cenovus Energy and Canadian Natural Resources Ltd. promise a significant portion of the increase in oil production. They are now actively making changes to their operations to improve efficiency.
The companies are making significant progress in implementing step-out and tie-back projects. These are oil sands thermal treatment projects where, instead of building a new unit to develop bitumen deposits, new areas are connected to existing units. This speeds up field development and reduces costs.
The situation in the industry has recovered to such an extent that companies can invest money in oil production growth while maintaining returns for shareholders. According to analysts, the decision to ramp up production indicates that producers are confident that prices will remain at the same level.
The average price of benchmark North American crude oil since the beginning of the year is USD 75.64 per barrel. This is below the 2022 highs, but well above the five-year average of USD 65.89.
It is worth noting that increasing oil production while doing so would run counter to the Canadian government's efforts to reduce carbon dioxide emissions by 40-45% by 2030, as the oil and gas industry is the most polluting sector of the country's economy.
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RBN Energy forecasts that the volume of oil production in Canada will increase by 175 thousand barrels per day this year, and in 2024 by another 200 thousand barrels per day. S&P Global Commodity Insights believes that the increase in oil production from oil sands alone will be about 350 thousand barrels per day in 2025.
