Canadian crude prices are expected to remain volatile for the rest of this decade as production from sanctioned oilsands projects ramps up, says Volatile Canadian Crude Oil Prices—A Growing Challenge, a recent report by research firm Wood Mackenzie Limited.
In the summer of 2012, there was talk that natural gas would be worthless going into the winter heating season, with producers giving the commodity away.
That didn’t pan out. Instead, the price has steadily climbed as a drop in gas-targeted drilling across North America, combined with a colder-than-expected winter in the eastern United States, improved the supply and demand balance. As of May, the Canadian price has climbed to $4.30 per million British thermal units.
Canada’s petroleum industry is all revved up with no place to go.
Oil production continues climbing as new oilsands operations come on stream and tight oil plays add incremental production. Production is expected to double to around 5.7 million barrels per day over the next decade. But challenges in building new pipelines have created bottlenecks in the system, resulting in huge discounts on Canadian oil.
Just how important have tight oil plays been in the resurgence of western Canada’s light oil business?
In 2011, the Cardium play in Alberta accounted for 12 per cent of all production additions in the Western Canadian Sedimentary Basin, and the Bakken in Saskatchewan added another seven per cent, according to a report by New York–based ITG Investment Research that looked at data from more than 300,000 wells.
The last two years have been good times for North American pressure pumpers, as an explosion in multistage fracturing operations in tight oil plays added to ongoing shale gas drilling, resulting in massive growth in pressure-pumping demand.