Economic impact of oil sands development

June 13, 2013

The Canadian Energy Research Institute (CERI) has a succinct paper that examines the economic impact of oil sand development.

A few observations:

• Total western Canadian oil production in 2011 was 3 M barrels/day, most of which was exported to the US. Oil is Canada’s largest export.
• Conventional oil production is about 1 M bbls/day and forecast to increase by 150,000 bbls/day by 2017, then start to decline.
• Mined bitumen is about 1.25 M bbls while in situ 750,000 in 2013 (forecast).
• The GDP impacts are greatest in Alberta. Extra-provincial impacts affect Ontario 55%, BC 24% and Quebec 12%.
• CERI observes that the crude pipeline capacity out of Western Canada is sufficient to transport production coming from on stream and under construction oil sands projects. Additional crude export capacity from Western Canada will be essential by as early as 2015.

Meanwhile the International Energy Agency states that “The economics of upgrading mined bitumen for production of light synthetic crude oil are challenged in light of the large volumes of incremental output occurring in the U.S.” The IEA projects oil sands projection to increase by 1.3 million barrels a day by 2018, raising production of total Canadian liquids to 5 million barrels a day in 2018, from 3.7 million now.

 

Commentary

Sustained oil prices over $90/barrel have provided marketplace incentives for exploration of unconventional oil supplies throughout North America. Technological breakthroughs (fracking/horizontal drilling, etc.) have led to huge efforts to find new oil. The oil sands is economically a huge driver of growth and jobs throughout Canada.

Sources

• a)Dinara Millington, "Economic Impacts of Oil Sands Development", Canadian Energy Research Institute, Oct-2012. See http://www.ceri.ca/images/stories/CERI_PortstoPlains_Conference_Final_Oct_2012.pdf



• b)http://www.theglobeandmail.com/report-on-business/top-business-stories/oil-sands-production-to-surge-amid-north-american-supply-shock-iea/article11907120/