Despite lower crude oil prices, Canadian oil production is expected to continue its increase through 2017, the U.S.’ Energy Information Administration (EIA) data revealed Thursday.
According to data from the EIA’s February Short-Term Energy Outlook, Canadian oil projects that were already under construction are the main driver of production growth.
In addition, production of petroleum and other liquids in Canada, which totaled 4.5 million barrels per day (b/d) in 2015, is expected to average 4.6 million b/d in 2016 and 4.8 million b/d in 2017.
“This increase is driven by growth in oil sands production of about 300,000 b/d by the end of 2017, which is partially offset by a decline in conventional oil production,” according to the statement.
Prices of heavy [dense] Canadian crude oil are linked to the Western Canadian Select (WCS) benchmark; an index of different conventional and synthetic crude oils.
“WCS has traded at about $15 to $20 per barrel (US $/b) lower than the U.S. benchmark West Texas Intermediate (WTI) crude oil since early 2014, because WCS has to be transported over a longer distance to refineries and – because of its density and quality – it is more difficult to process into petroleum products,” the report indicates.
The average price for WCS in January 2016 was $18.42 per barrel – about $15 per barrel below WTI.
Additionally, the cost to shut down an existing oil sands project is estimated to be in the range of $500 million to $1 billion in the short term.
EIA’s forecast for oil prices, which projects an increase in prices from 35 to 60 dollars per barrel on average over the next couple of years, is expected to allow new projects to earn a return over their running cost.
According to EIA, Canada is a net exporter of most energy commodities and a significant producer of crude oil and other liquids from oil sands, natural gas, and hydroelectricity.