NOVA / AECO Natural Gas Price Graph

Canada’s top natural gas user, Alberta oilsands production, will increase even if the worst current projection of fossil fuel markets turns out to be true, according to a Calgary-based energy economics agency.

The global slump caused by public health emergency responses to the Covid-19 pandemic only eroded the Alberta industry’s growth rate, the Canadian Energy Research Institute (CERI) said.

“There are early signs of improvement, but the recovery ahead is a long road filled with uncertainty,” said CERI researchers. “While some early shut-in production is coming back, it is still uncertain how much and how quickly it will come online.”

Average 2020 cuts off 2019 oilsands production of 3.1 million b/d remain unknown, CERI noted. The setbacks could range from 215,000 b/d to more than 1 million b/d depending on how economies evolve to the end of the year.

In CERI’s worst-case scenario, global demand destruction hits 30 million b/d and lingers indefinitely. However, Alberta oilsands output is seen increasing from the 2019 pre-pandemic pace by 13% to 3.5 million b/d in 2030, and by 39% to 4.3 million b/d in 2039.

Canada Oilsands Production

In the medium-term scenario, the global oil market is forecast to shrink by 25 million b/d and last through 2022. Oilsands production in that scenario grows by 22% to 3.8 million b/d in 2030 and by 48% to 4.6 million b/d in 2039.

In the best-case industry scenario, global demand destruction stops at 20 million b/d and recovery is complete in 2021. Oilsands output grows by 26% to 3.9 million b/d in 2030 and by 52% to 4.7 million b/d in 2039.

CERI rejected predictions by some analysts from companies that have exited oilsands projects who say the current investment freeze would be permanent.

“For oilsands opponents, sustained decline in investment provides a point of view that the industry is too costly to compete,” researchers said. “What this view ignores, however, is continuing capital and operating cost reductions captured by project operators through efficiency initiatives.

“Continuing efforts at reducing costs through technological improvements and other operational measures, while remaining conscious of the environment, should ensure a robust future.”

CERI estimated Alberta oilsands mines and underground extraction sites achieved an overall average production cost cut of 40% with pre-pandemic adaptations to the global oil price slump of 2014-2018.

Oilsands carbon emissions, owed to natural gas-fired production heat processes and a reduction target of climate activists and government policies, rise in all of the CERI scenarios.

From a 2019 pre-pandemic level of about 70 million tons, CERI predicted annual oilsands greenhouse gas emissions to increase to 87.3-98.5 million tons by 2039. 

Canadian governments have set an industry sector emissions cap of 100 million tons/year. In an analysis issued earlier this month, IHS Markit said Alberta oilsands plants had slowed the growth rate of carbon emissions by becoming more efficient. 

CERI noted that the emissions forecasts do not yet take into account all of the emerging efficiency gains and substitutes for gas-fired oilsands processes. Another analysis later this year expects to examine gas use and environmental improvements.