Will Canada be Our Salvation?
There have been occasional claims from U.S. media sources that oil from Canada, specifically oil from the Athabasca oil sands region, can be the salvation for US oil woes in the future, assuming drilling everywhere in the US doesn’t do the trick. An example of such optimism was exemplified in a 60 Minutes segment about a year ago which gave the impression that the Athabascan region could supply much of the future U.S. oil needs.
There is a considerable volume of oil in the Athabasca region and production has been increasing over the years. But how realistic is it to assume that oil sands oil will provide a significant portion of future U.S. oil needs?
In the 5-year period from 2002 through 2007, oil sands oil production increased from 660,000 b/d to 1,184,000 b/d, an average increase of about 105,000 b/d per year, but the increase from 2006 to 2007 was only 58,000 b/d. Canadian oil production through September 2008 is down about 50,000 b/d relative to the 2007 average, suggesting that there has been little or no increase in oil sands oil production in 2008. The 2002 to 2008 period has been a period of intense oil development in the Athabasca region.
In 2005, the U.S. Department of Energy/Energy Information Administration (US DOE/EIA) stated the following in their International Energy Outlook 2005 (IEO2005):
“Canada’s conventional oil output is expected to contract steadily, by about 600,000 barrels per day over the next 20 years, but an additional 3.5 million barrels per day of nonconventional output from oil sands projects is expected to be added.”
The US DOE/EIA projected that Canada’s conventional oil production will decline on average by 30,000 b/d per year and that oil sands oil production will increase on average by 175,000 b/d per year over the next 20 years. That means Canada’s total oil production would increase by 2.9 million b/d over the timeframe to 5.3 million b/d in 2025.
How has Canadian oil production actually done since 2005? Through September 2008, Canada’s oil production averaged 2.57 mb/d in 2008 compared to 2.37 mb/d in 2005 for an increase of 200,000 b/d. Based upon the US DOE/EIA forecast it should have risen approximately 435,000 b/d since 2005. As stated previously, Canada’s oil production is actually down approximately 50,000 b/d in 2008 relative to the 2007 average.
In the later half of 2008, numerous oil sands projects have been delayed or cancelled due to the decline in the price of oil since July 2008. That doesn’t bode well for a significant increase in oil sands oil production in 2009-2010 and possibly beyond.
With all the talk about oil production from the oil sands region of Canada, it’s often overlooked that in recent years, Atlantic Canada has become a significant oil producing region. If it had not been for a large production increase from Atlantic Canada in 2007 relative to 2006, Canada’s oil production in 2007 would have declined despite extensive oil sands developments.
Oil production from Atlantic Canada comes from 3 fields: Hibernia-Avalon, Terra Nova and White Rose. Table 1 provides data for these fields.
Maximum Production Rate (b/d)
2008 Production Rate* (b/d)
Estimated Ultimate Recovery (Mb)
Cumulative Production (Mb)*
% of Oil Produced
|Terra Nova|| |
|White Rose|| |
*Through October 2008
In 2007, Atlantic Canada’s oil production increased by nearly 65,000 b/d relative to 2006. That increase was related to the Terra Nova field being out of commission for 5 months in 2006 and because there was a large increase in production from the White Rose field in 2007.
Other than a few minor fields, there is not much left in Atlantic Canada to tap into. Clearly Atlantic Canada is in decline. Peak production occurred in 2007 at 368,437 b/d. Through October 2008, production has averaged 342,913 b/d in 2008, down 25,524 b/d. Hibernia-Avalon and Terra Nova are definitely in decline and it appears that White Rose has also entered decline.
Beyond Atlantic Canada, most of the remaining conventional oil production in Canada comes from Alberta and Saskatchewan. Alberta’s conventional oil production has now declined to about 1/3rd of its maximum production rate of 1.417 mb/d, which occurred in 1976. Saskatchewan’s oil production has been relatively flat and around its maximum production rate of 420,000-430,000 b/d in the last 5 years.
Table 2 provides data to assess how Canadian oil production is doing outside of the oil sands region and Atlantic Canada.
Total Canadian Oil* Production (mb/d)
Oil Sands Oil Production (mb/d)
Atlantic Canada Oil Production (mb/d)
Total - Oil Sands - Atlantic Canada (mb/d)
* Total oil = conventional crude oil, lease condensate, and oil from the tar sands
Based upon Table 2, Canadian oil production outside of the oil sands region and Atlantic Canada has declined at a rate of about 2.7%/year over the 2002-2007 period. Atlantic Canada’s oil production is down 6.9% in 2008 relative to 2007 as the region has entered long-term decline.
If Canadian oil production outside of the oil sands region plus Atlantic Canada continues to decline at 2.7%/year and Atlantic Canada’s production declines at 6.9%/year through 2025, the total decline from 2007 to 2025 would be ~679,000 b/d, a bit more than what the US DOE/EIA predicted for the 2005 to 2025 period.
To increase Canadian oil production to 5.3 mb/d in 2025, as the US DOE/EIA was projecting in 2005, oil sands oil production would have to increase to around 4.55 mb/d. Although the industry talks about producing 5 mb/d of oil from oil sands in the future, the difficulties of the last few years at increasing production should make it clear that the probability of that production level is pretty low.
I personally believe the industry will be lucky to reach a maximum of 3 million b/d from the oil sands. Scaling up oil production from oil sands involves major challenges that many people prefer to ignore. If the 3 million b/d level was reached in 2025, Canada would be producing less than 4 million b/d and would not be able to export dramatically more than it does today. The bottom line is that the U.S. should not expect Canadian oil to provide a salvation to U.S. oil woes in the future.
(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators)
Roger Blanchard teaches chemistry at Lake Superior State University and authored book “The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region”, McFarland & Company.