* CIBC analyst sees up to 2.5 mln bpd jump by 2020
* New supply puts more pressure on pipeline capacity
* CAPP forecast due in coming weeks
By Jeffrey Jones
CALGARY, Alberta, May 17 Production in the
Canadian oil sands is likely to increase at a much faster clip
than the industry currently projects, an analyst said, putting
more pressure on pipeline companies to vastly expand capacity
out of Alberta.
The forecast comes as companies plot billions of dollars
worth of new pipeline routes to stave off costly bottlenecks.
The latest is Enbridge Inc's plan, announced Wednesday,
to spend C$3.2 billion ($3.15 billion) on pipelines, most of it
to get crude from Alberta to Eastern Canada.
Andrew Potter, analyst at CIBC World Markets, said he
expects production from the oil sands of northern Alberta, the
world's third biggest crude resource, to jump to 2 million to
2.5 billion barrels a day by 2020 from last year's output of 1.6
That compares with the last forecast from the Canadian
Association of Petroleum Producers, an often-cited study, of an
increase of 1.4 million bpd. CAPP is expected to release its
2012 forecast in the coming weeks.
In a report, Potter said CAPP's current outlook appears
conservative, based on the number and size of projects now under
construction and those that he said have a high likelihood of
being sanctioned by well-funded developers.
Under his scenario, overall oil sands production, from both
mining and steam-driven projects, could climb to as much as 4.1
million barrels a day in eight years, 37 percent more than under
the CAPP outlook.
"While long-term company forecasts are inherently
optimistic, as, in reality, financing, inflation and crude oil
price volatility wreak havoc with the best-intentioned plans,
this is, nonetheless, a considerable gap," he wrote.
His forecast averages out to gains of 220,000 bpd-270,000
bpd each year, a figure that is between CAPP's forecast and
companies' own, often optimistic, expectations.
The industry, analysts and governments have for more than a
year pointed to CAPP numbers and said that Canadian oil
production will bump up against current pipeline capacity by
2015 or 2016, underlining the need for such major projects as
TransCanada Corp's Keystone XL pipeline to Texas and
Enbridge's Northern Gateway conduit to the Pacific Coast.
The projects face staunch opposition from environmental
groups and some native communities opposed to surging oil sands
development and risks of oil spills from pipelines.
Ottawa is in the midst of a controversial move to revamp
legislation on environmental assessments for major energy
projects, saying opponents have too much power under the curent
system to delay badly needed infrastructure.
On Wednesday, Enbridge said it plans a series of expansions
in Canada and the United States in support of a reversal of Line
9 between Sarnia, Ontario, and Montreal, which would send crude
to refineries in Quebec and eastward, which are currently fed by
"It helps alleviate some of that pressure," Potter said.
"But the whole point of this report is to say that there is
going to continue to be big pressure on infrastructure and we
just need to see more and more of these things go ahead."
Over the past year, tight pipeline capacity has been blamed
for price discounts on Canadian crude that have at times set
Major oil sands mining projects expected to start up in the
next four years include Imperial Oil Ltd's C$10.9
billion Kearl development and its second phase, an expansion of
Canadian Natural Resources Ltd's Horizon venture, and a
pair of projects planned by Suncor Energy Inc and Total
SA : Fort Hills and Joslyn.
Dozens of steam-driven projects are on tap, both in the
development and planning stages, from companies including
Canadian Natural, Suncor, Cenovus Energy Inc, and Devon