Oilsands to elbow out conventional production: forecast -
John Morrissy
Canwest News Service
Friday, February 15, 2008
OTTAWA -- Canada's oilsands are taking over where conventional
oil production left off, with profits in the oil-extraction
industry forecast to rise 18 per cent to a record $23 billion
in 2008 on rapidly rising output from the huge oil reserves,
according to the Conference Board of Canada.
"Investment in upgrading and oilsands mines are finally paying
off, as non-conventional production is set to accelerate
rapidly," the board said Thursday in its outlook for the
country's oil-extraction industry.
"Non-conventional oil production will be the main driver
behind gains in domestic production for the foreseeable
future."
In fact, the oilsands will surpass conventional production
for the first time this year, said the report's author,
Todd Crawford.
After peaking at 1.8 million barrels a day in 2002,
conventional crude output will fall to 1.37 million barrels
a day in 2008 and further to 1.2 million barrels in 2012.
This is largely a result of declines in the western
sedimentary basin, but also a function of falling numbers
on Canada's East Coast, whose three fields all face
declining output before new fields go into production,
Crawford said.
Production in the oilsands, meanwhile, will rise from
1.25 million barrels a day in 2007 to a 1.48 million
barrels in 2008 and to 1.62 million barrels in 2009,
Crawford said.
This will drive Canada's energy industry to another year
of record profits in 2008 as oil prices are expected
stay above $80 US, the report predicted.
However, rising industry costs and new global supply
coming on-stream will cause profits to fall by 29 per cent
in 2009 before picking up again in 2010.
Crawford said changes to Alberta's royalty regime won't have
an impact on investment in the oilsands, estimated to
contain the world's largest crude reserves outside
Saudi Arabia.
"Even though royalties may be higher, (oil) prices have
been quite a bit higher than company forecasts, so in the
end we forecast it'll come out to be a wash," Crawford said.
Materials prices, however, are a more daunting matter,
Crawford said, much more than even labour, and constitute
the greatest component of cost gains for the year.
Rising prices of steel, concrete, diesel fuel and other
inputs for Alberta's massive oilsands projects will
rise 22 per cent in 2008.
Such double-digit gains over the past four years have
driven many of the projects into multi-billion dollar
cost overruns.
Canadian Natural Resources was the latest to do so, saying
its Horizon project in northern Alberta will now cost
as much as $8.7 billion, $1.9 billion more than
initial estimates.
Horizon will be one of the drivers of oilsands output this
year when it starts producing in the third quarter at
an expected rate of 110,000 barrels a day.
Suncor, whose oilsands business is located near Fort McMurray,
produced 245,000 barrels a day on an annualized basis
in January and is targeting average annual output of
275,000 to 300,000 barrels a day in 2008.
New output will also come from a bitumen upgrader --
which converts the thick oilsands petroleum into usable
crude -- being built by BA Energy, expected to
begin operations this year.
Gains in oilsands output will more than make up for
conventional crude declines and Canada's overall output
is forecast for rise 9.2 per cent in 2008.
The StarPhoenix (Saskatoon) 2008
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