CLARIFICATION: How Much Can Canadian Oil Ramp Up? Here's the Short Answer and Why - Matthew Foss

How much can Canadian oil ramp up?

Short answer is that Canadian oil production can offer perhaps 300,000 barrels of production growth over the next 12 to 24 months. Substantially more is not physically possible even with willingness to invest, public support and government policy alignment. Let me elaborate:

Canadian oil is realistically of 3 types: offshore on the East Coast, onshore conventional/tight/shale oil and oil sands:

East Coast offshore oil represents about 285,000 barrels per day. This is about 8% higher than last year. Once a discovery is made, a development plan and production facilities must be designed and built. This requires a few years. With no recent discoveries under development there is only optimization of existing discoveries to add production.

Onshore oil is produced on the prairies. Similar to the shale oil story in the US these wells have become more productive over time as drilling efficiencies have improved. Production from the prairies reached 1.1 million barrels per day in 2014 before declining to 860,000 barrels per day in 2020. Drilling is far below the levels at the start of last decade. There is160 rigs active compared to almost 400 a decade ago. Many of the drilling crews and equipment have left the industry with multiple years of limited work available. Production is up about 30,000 barrels per day year over year. The opportunity to grow this at a faster pace would require human resources and equipment that do not appear readily available. Without equipment and crews it is not possible to return to the levels of 2010-2014. Perhaps another 30,000 to 50,000 barrels are possible.

Oil sands represents the big prize for Canadian oil production. Oil sands are currently producing about 3.3 million barrels per day. This is up about 100,000 barrels per day over the same period last year. Oil sands production comes from large projects with 70% of this coming from the top 10 projects. Oil sands production increased rapidly between 2005 and 2020 production roughly tripled from 1 million barrels per day as many new projects were started over this period. However, by 2013 potential developers had identified that pipeline capacity would limit new production growth and new project development was essentially halted before prices even collapsed. The ongoing construction of the Trans Mountain pipeline expansion offered some hope but essentially no new projects have received final investment decisions. New projects would require a couple of years to build to bring on production once investors are willing. There is room for some expansion and optimization of the existing projects as well as the full ramp up of a few larger projects that have recently begun. However, these will offer only minor gains . Incremental production from oil sands will be limited this year to perhaps another 100,000 to 300,000 barrels per day.