ITG Investment Research, a leading independent execution and research broker, today announced the release of a comprehensive report providing a production, supply cost and takeaway scenario, assuming current prices and costs, for Western Canadian oil and natural gas. The report projects an increase in Canadian crude production to 5.7 million barrels (Mmbbl) per day by 2025 which would double current production levels.
The report notes that while production ramps up, pipeline capacity will fall behind, even if projects including the Keystone and Northern Gateway pipelines proceed. This will force the industry to utilize rail shipments for as much as .06 Mmbbl per day. 64 percent of the expected growth would come from oil sands in Western Canada. If pipeline capacities are not increased, the report suggests as much as 3.5 Mmbbl of crude per day would have to be moved via rail by 2023 -- up from today’s rail shipments of roughly 1 Mmbbl per day.
Meanwhile, Western Canadian natural gas production is expected to increase as well, but only by 3 billion cubic feet (Bcf) per day to 19 Bcf per day. Here again, pipeline restrictions may take their toll on moving product from the field to processing facilities.
Currently, the U.S. relies on Canada as its number one external supplier of crude oil and, as is always the case with crude and natural gas outlooks, pipeline and refinery capacity in the U.S. will have to catch up to take advantage of the rich Canadian supply ahead.
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