Canada is home to an estimated 172 billion bbls of oil. The Canadian Association of Petroleum Producers (CAPP) expects oilsands production alone to average approximately 2.5 million bpd in 2016, up from 2.35 million bpd in 2015.
According to the National Energy Board (NEB), by 2018, approximately 1.1 million bpd will be added to oilsands production, bringing the total to 2.37 million bpd. The NEB also expects Canada’s marketable natural gas production to rise from 13.2 billion ft3/d in 2015, to 17.4 billion ft3/d by 2035.
However, it could do a lot more if it weren’t for the fact that it has no major access to tidewater, despite having thousands of kilometres of coastline.
Over the last decade, opposition to pipelines has been a major proxy for environmental groups who are opposed to the production of ‘dirty oil’ in the oilsands. Their crowning achievement came in late 2015, when US President Obama rejected the Keystone XL project.
But, other major projects also face hurdles. Thanks to the growth of Marcellus shale gas entering eastern Canada from the US, TransCanada’s mainline gas transmission system has been running well below capacity. The company would like to re-purpose part of the system to crude transmission and extend it to tidewater. The pipeline proposal would deliver up to 1.1 million bpd from Alberta to the deepwater port of St. John (New Brunswick). Mayors in the Montreal region are leading an attack against the proposal and the province of Quebec is unenthusiastic about the idea.
In 2014, Enbridge was given approval by the NEB to construct the Northern Gateway pipeline, designed to move up to 525 000 bpd from Alberta to the deepwater port of Kitimat, British Columbia (BC). However, in June 2016, Canada’s Federal Court of Appeal overturned the approval citing the lack of consultation with aboriginals regarding their concerns over the impact on traditional territories.
The lack of export pipeline capacity has already had an impact on the oilsands. Yet, that is only one woe in a string of challenges that now face the region. In late spring, the Fort McMurray area was threatened by a massive wildfire that destroyed part of the city and forced over 1 million bpd offline. Fortunately, the sector was able to recover relatively quickly. The low price commodity environment is expected to have more significant long-term repercussions, however. Major oilsands projects are being put on hold or cancelled as oil companies struggle to cover their balance sheets. In all, the Conference Board of Canada predicts that Canadian oil and gas producers will report a total of CAN$4 billion in pre-tax losses this year, in addition to the CAN$7 billion recorded last year.
In Alberta, the network to move crude, gas and NGLs has been expanding at a significant pace. Pembina continues with its Phase III expansion programme and TransCanada has received approval from the Alberta Energy Regulator (AER) to build and operate the Northern Courier pipeline. Pembina has also earmarked CAN$125 million to double its Horizon pipeline system capacity by 250 000 bpd.
New major gas transmission lines are also being advanced in BC, where the LNG sector is positioning itself for take-off.
In order to supply the billions of cubic feet of gas that would be needed on a daily basis, pipeline companies have been touting half a dozen proposed lines. TransCanada recently signed a string of long-term agreements with First Nation tribes along its Coastal Gas Link right-of-way. The 670 km gas line is designed to gather up to 5 billion ft3/d of shale gas in the Dawson Creek, BC, region and transport it to the proposed LNG Canada export facility near Kitimat. The BC government has also granted environmental certificates to the Westcoast Connector gas transmission pipeline and the Prince Rupert gas transmission pipelines.
Part 2 coming soon!
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