The extensions of oil pipelines in Canada and the development of new export routes could generate enough capacity to support an additional growth of between 2 and 3 million barrels per day (MMbpd) of oil in the west of the country towards the end of the 2030s, according to an analysis by Enverus Intelligence Research (EIR).
The increased availability of transportation infrastructure could alter one of the main factors that have historically limited the growth of the Canadian oil industry. EIR estimates that production from the Western Canada Sedimentary Basin (WCSB) will increase by approximately 200,000 barrels per day per year until 2035.
Pipelines in Canada would cover production growth
For much of the next decade, the available capacity in the Canadian pipelines it could be kept above the needs of producers, thus reducing the risk of new bottlenecks in crude oil transportation.
This additional margin could also help avoid the steep discounts that Canadian oil has historically suffered when the available infrastructure has not been sufficient to move production to major markets.
According to EIR, there is approximately 1 MMbpd of additional firm capacity that could be incorporated through optimizations of existing infrastructure, expansions of transport systems and the development of the Prairie Connector-Bridger project.
Prairie Connector-Bridger gains ground among new projects
Among the proposed new pipelines analyzed, Prairie Connector-Bridger stands out as the project with the highest probability of moving forward, according to EIR assessment.
The firm highlights the developer’s commitment, the route’s viability, and the commercial support achieved to date as key strengths. The project also has customer transport commitments for approximately 465,000 barrels per day over a 20-year period.
Meanwhile, the West Coast Oil Pipeline ranks second among the proposals evaluated, the project contemplates a capacity of over 1 MMbpd, which would make it the largest initiative among the alternatives considered.
The addition of these new routes would expand the options for transporting oil from western Canada and strengthen the country’s export capacity over the next decade.
The WCS-WTI price differential could stabilize
In this context, Enverus Intelligence Research forecasts that Western Canadian Select (WCS) will maintain a differential of approximately between 12 and 15 dollars per barrel compared to West Texas Intermediate (WTI).
That range would correspond, in general terms, to the cost necessary for transport Canadian crude oil to the Gulf Coast of the United States.
Having sufficient transport capacity would reduce the likelihood of logistical constraints once again putting significant pressure on Canadian oil prices. As a result, other factors directly related to production would begin to play a more significant role in the sector’s growth.
The oil sands would add 1.3 million barrels per day
Under this scenario, EIR estimates that production from oil sands could increase by about 1.3 MMbpd until 2035. However, having greater pipeline capacity does not necessarily mean that all of that space will be used. Factors such as the capital discipline of producing companies and the availability of diluents could limit the rate at which production increases.
In this way, growth Canadian oil tanker it would increasingly depend on upstream segment conditions and operators’ investment decisions, while transportation-related restrictions would lose some of the weight they have historically held.
Oil growth will increase demand for condensates
The anticipated expansion of the oil sands would also impact other areas of Canada’s energy infrastructure. According to EIR estimates, additional demand for condensate could increase by approximately 500,000 barrels per day by the mid-2030s.
This increase could generate new infrastructure needs as oil sands production progresses and the volume of hydrocarbons that must be transported in and out of Canada grows.
Consequently, pipeline expansions in Canada could alleviate some of the constraints that have limited the country’s oil production growth for years. At the same time, the industry’s focus could shift toward the availability of diluents, upstream investments, and producers’ ability to take advantage of the new capacity available in the transportation infrastructure.
Source: World Oil
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