Home Commodities Commodities 2024: Canada oil sands producers in expansion mode, await more market...

Commodities 2024: Canada oil sands producers in expansion mode, await more market access

27
0

Highlights

Tighter price differentials to boost export demand

Imperial, Cenovus, CNR adding new bitumen capacity

TMX will be major game changer for WCSB producers

The startup of a pipeline expansion anticipated in early 2024 will tighten light/heavy oil price differentials and boost efforts to export more Western Canadian oil sands crude barrels to the US Gulf Coast and West Coast, according to industry participants.

Not registered?


Receive daily email alerts, subscriber notes & personalize your experience.


Register Now

“Volatile pricing was a key factor in 2023 and added to it was the heavy planned maintenance at multiple Canadian and US refineries in the Midwest that impacted some 2.5 million b/d of crude movements during the late summer months,” Greg Stringham, a former vice president for markets with the Canadian Association of Petroleum Producers, told S&P Global Commodity Insights in an interview.

“The [Western Canadian Select]/WTI differentials swung from a low of $12/b in July to $25/b in November and this has been a dominant theme in the current year,” Stringham said.

WCS/WTI differentials have been seen to narrow as refinery demand for Canadian heavy barrels picked up after the annual maintenance season.

Hardisty, Alberta Western Canadian select spot price discount to WCS at Nederland, Texas, narrowed in December. The discount averaged $12.15/b so far in December, narrowing from $16.69/b in November, Platts assessments show.

Platts is part of S&P Global.

Despite the highs and lows of price differentials, Alberta’s oil sands producers is anticipated to end 2023 with an output of 3.345 million b/d (through both in-situ and mining process), which will be nearly 90,000 b/d or 3% more compared with the 2022 output of 3.250 million b/d, the provincial government said in its “2023-24 Fiscal Update and Economic Statement” issued in November.

Output in 2024 is forecast to be 3.430 million b/d — an increase of 91,000 b/d on the year — and grow by another 93,000 b/d to reach 3.529 million b/d in 2025, the update said.

“Producers are positive on their growth plan for 2024 as it is one of the few parts of their business they can control. But the industry will see increased investments particularly with the start up of [Trans Mountain Expansion] pipeline,” Stringham said.

Western Canada’s oil sands production is estimated to grow 2% to 4% annually, the director of R-Cube Economic Consulting, Vijay Muralidharan, said in an interview.

“However, there could be some headwinds, like an economic slowdown in the first half of 2024 that will impact demand for heavy crude, rising interest rates and a widening of price differentials with US refinery maintenance in the first and second quarters,” Muralidharan said. “In the first half of 2024, the WCS/WTI differentials will range $18/b to $21/b, before narrowing to $13/b to $15/b when TMX starts ramping up.”

New WCSB basin egress

Operator Trans Mountain Corp. is looking to start line filling for the 590,000 b/d TMX in the first quarter of 2024, following mechanical completion by end 2023, spokesperson Allison Penton said in an email.

“It takes about 4.5 million barrels of oil and approximately six to seven weeks to complete line fill,” Penton said. “We expect commercial operations to commence near the end of Q1 2024.”

TMX will run from Edmonton in Alberta to the Westridge marine terminal on the West Coast and provide Western Canadian Sedimentary Basin producers with an a new export option, Muralidharan said.

“[TMX] is being built on the premise of offering the best price for Western Canadian producers. If the price is right, USGC will take all those barrels. But Asian refiners and those in Europe will compete by paying a premium for those barrels on TMX,” Muralidharan said.

Oil sands producers are awaiting the start up of a new pipeline after nearly 30 months, with the last infrastructure development being Enbridge’s Line 3 on Oct. 1, 2021.

“TMX is 97.8% complete as per the latest update on December 5 and we are waiting to hear back on the next steps [in terms of line filling]. Our 2024 capital deployment is matched up in line with the pipeline start up,” Canadian Natural Resources COO for Oil Sands Scott Stauth said mid-December on a webcast to discuss the company’s 2024 budget.

In 2024, CNR’s focus in the first half will be on drilling activities related to longer-cycle projects primarily in the thermal in situ sector in Alberta, Stauth said, adding during the second half “we will focus on shorter-cycle development opportunities to better align with incremental market egress and potentially improved commodity pricing [with the start up of TMX].”

As Canada’s largest liquids producer, CNR will exit 2024 with an output of 1.455 million b/d of oil equivalent which will be 40,000 boe/d more than the previous year.

Additional output is also planned by fellow producers such as Cenovus Energy and Imperial Oil.

In the upstream sector, Imperial’s key projects include the in-situ redevelopment of the Leming Field and high-value drilling opportunities at Cold Lake, the company said mid-December while releasing its 2024 capex.

Also in 2024, Imperial said it will see an accelerated ramp up of the first phase of the Grand Rapids project at Cold Lake that will deliver 15,000 b/d gross at full production.

Cenovus plans to invest C$2.5 billion to C$2.75 billion ($1.9 billion to $2.08 billion) in its oil sands assets in 2024, including nearly C$650 million of growth and optimization capital. The projects include: Foster Creek optimization, Narrows Lake tie-back to Christina Lake and optimization and new well pads at Sunrise, it said mid-December.

“This growth will come from new wells coming onstream as well as the optimization of existing oil sands facilities that have brought on incremental production,” S&P Global’s latest North American Crude Oil Markets Short-Term Outlook said. Oil sands production will drive most Western Canadian crude supply growth over the next 18 months — primarily from in-situ facilities where new well pads are expected to start up soon, it noted.



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here