What Awaits Canadian Oil Operators

Canada as one of oil production country felt fall of oil prices. Despite unsatisfactory forecasts for perspectives of local oil producing companies, volume of production in oil-bearing Calgary increases. Such development of events causes negative effects for Canada’s energy sector.

June was marked with a decline of CAPP forecasts in intraday production – 5.3 million barrels. Forecasts of 2014 were 6.4 million barrels. As a fact, indexes of intraday production were near 3.7 million barrels.

Experts think unanimously that capital-intensive oil sands with a price near 50-60 dollars for a barrel cause only loss, but this situation did not affect level of producing. Situation is interesting, because technological peculiarities of work with oil sands make closing of oil forces also very expensive. As a result, oil producers became between hammer and anvil with hopes on price stabilization and their further growth.

Oil reserves in Canada are quite large. According to assessments, they constitute near 339 milliard barrels, where the main share (near 90%) is oil sands. Canadian dollar has already reached its minimum for the last 10 years, which supports exporters’ ambitions, but this support may be considered as a temporary measure. Assessment of long-term consequences is very negative.

New projects freeze because of uncertain situation, and among analysts occurs an opinion – are oil sands worth developing? Oil for Canada is a main source of budget replenish and employment organization. For example, in Alberta province among 15-16 working places one place is connected with oil and gas sector. Last year budget of the country was replenished by 70 million dollars because of oil and bitumen.

Seems like time of oil-bearing sands slowly but steadily roots into the past. Probably, new offers will be revised and adapted to changed conditions, will be focused on quality than quantity. As an example, shale sphere in the U.S. may demonstrate serious success using flexible treatments to oil projects.

Growing level of Canada’s production raises question – what will they do with all oil? Mainly, all oil is exported in the U.S. – nearly 2.9 million barrels a day. Problem of oversupply became important in the U.S. On the background of prices fall shale companies had increased production, what let them to remain in market. Sooner or later this situation increases its impact and level of production in the U.S forcedly declines.

It is very simple solvation for the U.S. – to repeal the bill that lifts ban on oil export that is 40 years old. Senate has hot debates on this question now. Repeal of the bill opens world markets to the U.S., which is very profitably form economic position. But these changes may cause some reorientation of the sphere taking more time.  Thus, effect from such perspective is only for a short time.

The main question that disturbs Canada is absence of powerful pipeline infrastructure. American market is already full, desire to spread over European and Asian markets is very strong, but there are no opportunities to realize these plans. Version with Keystone XL pipeline was very perspective, but at the current moment production overcomes its capacity. Thus, internal developing plans are focused on transport infrastructure.

Energy East Pipeline project provided daily transport capacity 1.1 million barrels, but was leveled by negative react of popularity. The same thing happened to Northern Gateway Pipeline project (500,000 barrels a day), which was created to transport oil to Kitimat district in British Columbia.

Main source to transport Canada’s oil for today is railway source. But besides expensiveness, this source is very risky, which is proved by many accidents for the last two years.

There are now objective reasons for improvement in the nearest future. Extracting from oil-bearing sands even in times of high prices and stable market was very risky. Seems like, market volatility will deeply impact oil production.