June 27, 2024
-Oil Price.com
Canada’s oil output is booming as producers ramp up projects and extraction amid expanded market access and narrowing discounts of the Canadian heavy crude to the U.S. benchmark.
The Trans Mountain Expansion Project, now finally completed and operational after years of delays, is changing the fortunes of the oil sands producers in Alberta, giving them access to markets in Asia and the U.S. West Coast.
Constrained for years due to insufficient egress, Canada’s oil now has nearly 600,000 barrels per day (bpd) of additional market access. The expanded Trans Mountain pipeline is tripling the capacity of the original pipeline to 890,000 bpd from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
And producers are taking advantage of this. They began ramping up production at the end of last year in anticipation of the Trans Mountain Expansion (TMX) start in the first half of this year. Canadian oil firms now get more bang for their buck as the discount of Western Canada Select (WCS), the benchmark for Canadian heavy crude sold at Hardisty in Alberta, has narrowed relative to the U.S. crude oil benchmark, West Texas Intermediate (WTI) in recent weeks.
Moreover, the production increases in the oil sands are the result of the expansion of operational projects with existing infrastructure, so the capital expenditure – which is very high for this type of crude extraction – has been lower than for building projects from scratch.
The rise in Canada’s oil sands output, mostly thanks to the Trans Mountain Expansion, is making the country one of the top non-OPEC+ contributors to growing global supply this year, alongside the United States, Guyana, and Brazil.
Some analysts even forecast that Canada could be the single largest source of oil supply growth, ahead of the U.S. or Guyana.
“Barring any unforeseen circumstances, Canada could be the largest source of increased oil supply across the globe in 2024,” Marc Ercolao, economist at TD Economics, wrote in a report earlier this year.
This year, output growth in Canada could be 300,000 bpd –500,000 bpd, “putting the nation in the running to be the largest source of global oil supply growth,” Ercolao said.
Global oil supply growth estimates vary based on differing projections from forecasters and agencies, but Canadian oil could account for 25–67% of incremental supply in 2024, the economist noted.
“Canada should be able to capitalize on higher prices paid for our oil as well as the forthcoming ability to get Western oil reaching international markets,” Ercolao added.
