Defiant Canadian oil industry produces record 4 million bpd3/13/2013
Canada’s oil industry raised production to an all-time high of four million barrels per day for the first time last December, according to the International Energy Agency.
Canada is the world’s fifth largest producer of crude behind Russia (10.73 million bpd), Saudi Arabia (9.57 million bpd), the United States (9.15 million bpd) and is fast catching up to China (4.18 million bpd).
“Canadian oil production has increased rapidly over the last several months, reaching an alland#8208;time high of 4.1 mbpd in December on the back of a record 1 mbpd in synthetic crude output from surface mining operations,” the IEA said in a report published March 13.
The growth seemed to be all-round: Canada’s eastern offshore output returned to around 90% of preand#8208;maintenance output of 250,000 bpd. Alberta light and medium output also rose to 440,000 bpd, the highest level in a decade, on the back of new light tight oil development in Cardium and Viking in Alberta, along with other plays in Saskatchewan and Manitoba, the IEA said.
The IEA had indicated in its February report that Canadian production could cross 4 million bpd, and the latest figures confirm the trajectory.
The news comes as environmental groups are hoping that the disapproval of Keystone XL pipeline by the United States would slow down Canadian heavy crude production.
For now, oil sands production in 2013 is more likely to decelerate for logistical and tactical reasons.
“Planned maintenance at surface mining projects is likely to dent Canada’s output over the next several months,” said the IEA.
Suncor’s 350,000 Millennium upgrader is expected to undergo a 14-week maintenance this quarter while the 120,000 Firebag in situ project is expected to shutdown for maintenance. Meanwhile, Canadian Natural Resources Ltd.s 110,000 bpd Horizon upgrader is expected to be in maintenance mode for 18 days in May.
The repair work will pull mined synthetic crude output to average around 810,000 bpd in the second quarter, compared to 1 million bpd in December.
“There are two downside risks to this outlook. First, last year’s maintenance proved longer than initially announced, and this year could see a repeat,” said the IEA. “Second, with Western Canadian Select prices still experiencing a steep discount to WTI, operators may have an incentive to delay the restart of operations to a later time when the differential is more advantageous.”
The planned upgrade work is already strengthening Canadian synthetic crude prices. Light synthetic crude for April delivery last traded at a premium of $6.75 per barrel above West Texas Intermediate, according to Shorcan Energy Brokers, up from a settlement price on Monday of $3.10 per barrel above WTI.
Western Canada Select heavy grade for April delivery last traded at a discount to WTI of $20.25 per barrel, down from the day-prior settlement prices of $19.50 per barrel under the benchmark.The IEA expects Canadian output to hover around the four million bpd mark in 2013.
(The National Post)