FORT MCMURRAY, AB - JUNE 20: The Shell Oil Jackpine open pit mine uses trucks that are 3 stories tall,  weigh one million pounds, and cost 7 million dollars each. There is explosive growth in the oil field areas around Fort McMurray, Alberta, Canada. The oil extracted from this area is the product that would travel through the proposed Keystone XL oil pipeline. (Photo by Michael S. Williamson/The Washington Post via Getty Images)

Canadian Oil Sands – All Dressed Up But Nowhere to Go

  • The IEA expects Canadian oil sands production to grow by 8% y-o-y (180,000 b/d) in 2014
  • Canadian bitumen producers hope to expand their oil sands output to 5.2 million b/d by 2030 at 9% y-o-y, more than double current production
  • We consider this to be very optimistic, and forecast 2030 production between 2.3 and 4 million b/d, depending on prevailing WTI prices
  • Even at $110+/bbl, our bitumen production forecast is 1 million b/d less than CAPP’s projection for 2030
  • Projects currently producing are unlikely to be shut-in due to sunk costs
  • Despite refining difficulties and weak prices, most existing and under construction oil sand operations remain marginally profitable with WTI below US$70/bbl
  • But pipeline bottlenecks, labour shortages and rising costs of borrowing spell trouble, especially for smaller operators and start-ups
  • Persistently weak oil prices will slow production growth
  • Canada must focus on improving access to markets to support WCS prices

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