The era of expansion of tar sands/oil sands production may be over—at least for now. In light of price and delivery challenges, the Paris-based International Energy Agency forecasts that projects now being developed will be completed, but no new ones begun.
In what the IEA calls “the first truly free oil market since the pioneering days of the industry,” producers are pumping for whatever financial return they can get. “Today’s oil market conditions do not suggest that prices can recover sharply in the immediate future,” the agency’s Medium-Term Oil Market Report concludes.
Canada can expect to see “continued capacity increases (in) the near term” but “growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed,” the Financial Post reports.
Production is forecast to rise by around 100,000 barrels per day this year, then by 285,000 and 220,000 barrels per day in 2017 and 2018. Over the following two years, however, Canadian output will inch up by only about 35,000 barrels per day. By 2021, Canadian oil output is forecast to be around 5.2 million barrels per day, with 3.4 million of those from the tar sands/oil sands.
Canadian Press cites a lack of pipeline access to new markets and uncertainty over more assertive industry oversight by the Alberta government as further deterrents to additional tar sands/oil sands investment. Globally, investment in new oil production is predicted to fall 17% this year, after plummeting 24% in 2015.
The IEA anticipates that global crude oil production and demand will return to balance by late 2017—although it admits it has been wrong about when that would happen in previous forecasts dating back to 2014. Even after production and demand are back in balance, a substantial inventory glut will continue to suppress prices and investment in future production, the agency warns.
IEA Executive Director Fatih Birol warns that today’s oil glut may reverse by the end of the decade, however. “The historic investment cuts we are seeing raise the odds of unpleasant oil-security surprises,” he said.
For its part, Exxon forecast last month that tar sands/oil sands production would quadruple by 2040. Both forecasts will depend in part on the inroads made by clean energy, especially in transportation, in the next half decade.