Conventional oil production in Canada, which in already on the decline due to the current low prices and reduced drilling activities, will decrease to 1.47 million b/d by 2018 from 1.5 million b/d in 2015, an industry official said Monday.
The benefits of cutting-edge technology, particularly multistage fracking along with horizontal drilling, and higher WTI prices were seen in the past few years with Canadian light oil output reaching a high point of 1.5 million b/d in 2015, said Dinara Millington, vice president of research with the Canadian Energy Research Institute.
But that has changed with output now expected to decrease to 1.475 million b/d by 2017 and falling to 1.471 million b/d a year later, she said. Output in the current year is expected to be about 1.485 million b/d.
Millington's comments came after CERI issued Friday a study called: Canadian Crude Oil and Natural Gas Production and Supply Costs Outlook (2016 to 2036).
With an output of about 700,000 b/d, Alberta was the highest producer of conventional oil last year in Canada, followed by Saskatchewan at 500,000 b/d and Eastern Canada (mainly offshore Newfoundland and Labrador) the remaining 300,000 b/d, the study said.
The output figures represent both conventional oil and NGL production, the CERI study said, without giving a breakup.
The Alberta government said in a report this early summer the province's total conventional output last year was 560,000 b/d, implying NGL production was 140,000 b/d.
OUTPUT BEYOND 2018 TO RISE MARGINALLY
With some investments planned over the coming few years, conventional oil output will rise by about 35,000 b/d in 2019 and reach 1.505 million b/d by 2019 and 1.517 million b/d by 2020. But beyond that output will fall and average 1.2 million b/d by 2036, Millington said.
At the current Western Canadian supply costs of just under C$20 ($15.14)/b to C$45/b and C$35/b to C$65/b for horizontal and vertical drilling respectively, conventional producers will start investing capital when prices remain stable at WTI $50/b to $55/b for at least a few months, she said.
Conventional producers in Western Canada have three major issues to handle, Gary Leach, president of the Explorers and Producers Association of Canada, said Monday: access to capital; the need to further improve well economics; and an uptick in oil prices.
"Producers have been operating with varying margins and netbacks," Leach said. "At WTI $45/b, some investments will still be triggered, but producers need to keep their cost structure and maintain the strength of their balance sheets."
Last week, the Canadian government said China's Sinoenergy had committed to spend C$500 million in Calgary-based conventional producer Long Run Exploration over the next two years.
Long Run had no comments to offer, but Gordon Houlden, director of the China Institute at the University of Alberta, said Monday that Chinese interest in Canada's oil sector has "not vanished" even in the current low price environment.
"They are aware that Alberta's oil sands is the crown jewels," Houlden said. "But with the 2012 change in Canada's foreign ownership laws for that sector, they may be focusing on the conventional side. Technology has turned the future for conventional resources and Chinese SOEs [state-owned enterprises] have residual interest."
Leading light oil producer Crescent Point Energy's short-to-medium "continued intent is to live within its cash flow for dividends and capex and protect the balance sheet," Chief Operating Officer Neil Smith said Friday in an e-mail.
The company plans to spend C$450 million on growth projects, including a major waterflood expansion and a drilling program in Saskatchewan in 2017, Smith said.
"There has been a considerable amount of equity back into the oil sector in North America and especially in the US' Permian play," Smith said. "In Canada too, there remains a huge amount of money on the sidelines that is trying to price the bottom and get the best assets for the cheapest price."
DRILLING FORECAST FOR 2016, RESERVE POTENTIAL
Separately, CERI also said in the study that it estimates 392 conventional wells will be drilled in the current year in Canada with the potential to rise to 600 wells next year depending on investments by producers.
Also, the "ultimate" potential of conventional oil resources in Canada is estimated to be 22.2 billion barrels, with 10.2 billion in the Northwest Territories and Canadian Arctic, followed 7.7 billion in the Western Canadian Sedimentary Basin.
