Canadian Oil Production To Soar

By Eric Fox | June 13, 2012 AAA

Canadian oil production is expected to reach 6.2 million barrels per day by 2030 as the country continues to see increased exploration and development activity from the oil and gas industry. This projection is contained in a report issued by the Canadian Association of Petroleum Producers (CAPP), an industry group that represents oil and gas operators active in Canada.

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Production Growth
Canadian oil production totaled 3 million barrels per day in 2011, with 1.6 million barrels, or 53% coming from various oil sands projects. CAAP projects that production growth will escalate fairly quickly, reaching 4.7 million barrels in 2020 and 6.2 million barrels per day in 2030.

The bulk of this growth will come from the continued development of the oil sands deposits in Alberta, where dozens of companies have set up operations. The CAAP report estimates that oil sands production will be 3.2 million barrels per day in 2020, and 5 million barrels per day in 2030. This rate of growth would increase oil sands production to 81% of total Canadian production by that time.

Year Production Oil Sands Pct
2011 3.0 1.6 53%
2015 3.8 2.3 61%
2020 4.7 3.2 68%
2025 5.6 4.2 75%
2030 6.2 5.0 81%

(Millions of barrels per day)

Demand
Canada is well situated to supply this future oil production to users in the United States, which is the world's largest consumer, and continues to import large amounts of oil from other countries that are politically unstable. The oil will be supplied to consumers in Eastern Canada, which also imports oil from overseas.

SEE: Canada's Commodity Currency: Oil And The Loonie

Oil Sands Producers
The Athabasca Oil Sands Project (AOSP) is 60% owned by Royal Dutch Shell (NYSE:RDS.A, RDS.B) and has current capacity of 155,000 barrels per day. The project started production in 2003 and Royal Dutch Shell is building a 100,000 barrel per day expansion at AOSP. Chevron Corporation (NYSE:CVX) and Marathon Oil (NYSE:MRO) each own 20% of this project.

Canadian Producers
Several Canadian based oil and gas operators also have oil sands operations. Suncor (NYSE:SU) reported average daily production of 346,000 barrels of oil per day in May 2012 from its oil sands operations. The company plans to grow production at about an 8% annual rate and reach oil sands production of one million barrels of oil equivalent per day by 2020.

Nexen (NYSE:NXY) owns 65% of the Long Lake Project in Alberta and has a gross capacity of roughly 60,000 barrels of oil per day at this project. The company is working towards increasing production at Long Lake and recently made operational and regulatory progress here. Nexen's partner at Long Lake is CNOOC Ltd. (NYSE:CEO), which owns 35% of the project.

SEE: Oil And Gas Industry Primer

The Bottom Line
Canadian oil production is expected to more than double by 2030, as the huge oil sands resource base in Western Canada yields its riches. The U.S. and other consumers should appreciate this new supply from our politically stable neighbor.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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