While challenges persist, it has been a relatively smooth ride for oil sands producers over the last few years. Some people are beginning to wonder if this particular resource development play might be slowing, or worse, headed for steep decline.
Observers have suggested that the oil sands’ development growth may be over, noting that some companies have been unable to sell oil sands assets, including everything from leases to stakes in operating projects. Do these unsuccessful sales really signal a change in the pace of oil sands growth?
Recent forecasts suggest development will continue for years to come, with production ramping up significantly.
The Energy Resources Conservation Board (ERCB), for example, forecasts oil sands production to increase from 1.9 million barrels per day in 2012 to 3.8 million barrels per day in 2022.
And the Canadian Association of Petroleum Producers, in its crude oil forecast, predicts oil sands production will hit 5.2 billion million barrels per day by 2030, with Canadian crude oil production expected to be 6.7 million barrels per day by the same year (up from 3.2 million barrels per day in 2012).
These production increases will likely be driven by new oil sands projects. Even a quick look at an Alberta government oil sands project map reveals an immense volume of activity in the future. There are 17 oil sands projects under construction, 10 more approved and an additional 28 more in the application stage.
Like other extraction businesses, oil sands development has never been a slow, predictable growth story, and it does present unique challenges perceived as too risky for some. Would-be developers contend with tight crude oil transportation capacity, resurging conventional crude oil production, an uncertain regulatory climate, environment challenges, labour shortages and an unpredictable global economy. Then again, these are exactly the kinds of risks that current operators are managing with new technology, strong environmental practices and unprecedented levels of industry collaboration.
And even if the pace of oil sands expansion is indeed slowing, steadier growth which doesn’t feature sizable swings could be a blessing in disguise. As was observed a few years ago, boom times can lead to unintended consequences, especially for communities in the oil sands region.
Energy, economic contribution needed
We expect the oil sands industry will likely continue to attract investment capital needed for development of this valuable resource. And that’s a good thing. After all, the world needs energy and bitumen is a viable, proven energy source. Energy demand is slated to rise significantly over the next few decades, driven primarily by emerging economies like China. In a world whose population will have risen as high as nine billion by 2050, many are looking to raise their standard of life through affordable sources of energy, like crude oil.
While continued growth in oil sands bodes well for the long-term global energy situation, further expansion at any pace will contribute to keeping the Canadian and North America economies on positive trajectories.