“The competition for capital investment in the global marketplace is fierce and Canada is losing,” Canadian Association of Petroleum Producers (CAPP) CEO Tim McMillan said in a statement this week.

McMillan said that a lack of regulatory clarity, and the inability to see federally-approved pipelines get built, sends the signal that Canada is closed for business.

CAPP released its 2018 Crude Oil Forecast Markets and Transportation Report, showing inhibited growth in relation to lost projects including Northern Gateway, Pacific NorthWest LNG, and Energy East.

According to the forecast, Canada will have an additional 1.6 MMBPD exported out of western Canada by 2035 and will have a total oil production of 5.6 MMBPD. Most of this growth will be from increased oil sands production from 2.65 MMBPD to 4.2 MMBPD.

When Will Canadian Oil Production Be Competitive?

Source: CAPP

This is in line with the government of Canada’s purchase of the Trans Mountain pipeline from Kinder Morgan for $4.5 billion to ensure its expansion is completed, doubling the capacity of oil to Canada’s west coast. This is despite immense opposition from 22 BC municipalities, 150 first nations, a consolidated legal challenge involving 14 cases, and ongoing protests.

The CAPP’s forecast states that the greatest potential for growth specifically will be in the Montney and Duvernay formations. These formations will potentially add 500,000 BPD of pentanes and condensates by 2026.

Additional growth will be present in Eastern Canada thanks to offshore projects including Hebron, Hibernia, Terra Nova, and White Rose. Production is projected to rise to 290,000 BPD by 2025 and then will drop down to 70,000 BPD following 2025. Most of this area’s production will stem from the Hebron project.

Kinder Morgan delivered a shock to Canada’s energy industry in April when it announced it would shut down work on the Trans Mountain pipeline projects spurred by strong political opposition from British Columbia and a threat to block the project inside the province.

Then at the end of May, Kinder Morgan Canada Limited (TSX: KML) agreed to the offer to purchase the Trans Mountain Pipeline system and the expansion project (TMEP) by the Government of Canada for C$4.5 billion.

Kinder Morgan said it will work with the Government of Canada to seek a third-party buyer for the Trans Mountain Pipeline system and TMEP through July 22, 2018.

As part of the agreement, the Canadian government has agreed to fund the resumption of TMEP planning and construction work by guaranteeing TMEP’s advances under a separate Federal Government recourse credit facility until the transaction closes.


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