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Canadian oilsands & tight oil support North American energy

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Canadian oilsands and US tight oil production have become the twin pillars of North American energy security, accounting for nearly 95% percent of North American production growth from 2009 - 2015 and reducing offshore oil imports during that period by 40%, says a new report by IHS, a leading global source for critical information and insight. Despite expected declines due to low oil prices, total North American production this year (on an annualised basis) is expected to remain far above the 2009 level of 8.5 million bpd, at around 13 million bpd.

Entitled, ‘The Two Pillars: The Increasingly Integrated US-Canadian Oil Trade’, the new report by the IHS Canadian Oil Sands Dialogue compares the state of Canada and US oil import reliance over time and provides analysis on the contributions and implications of oil sands and tight oil growth to the North American oil balance and energy security.

Canadian oilsands and US tight oil were the primary drivers of overall growth in North American oil production, which rose by more than 5 million bpd from 2009 to 2015 making Canada and the US (if considered collectively) the largest producer in the world during that time, the report says. About half of North American refinery demand was met by offshore (i.e. non-US and Canadian) imports in 2009. In 2015, over 70% of refiners’ supply was met by domestic sources.

Despite the recent period of low oil prices and the resulting impact on investments in new production, IHS expects North American production volumes to level off later this year and average around 13 million bpd for 2016 – still well in excess (80% higher) of pre-2009 levels.

“The scale and resiliency of these resources through a time of low oil prices is striking", said Daniel Yergin, IHS Vice Chairman and Pulitzer Prize winning author. "The long lead times associated with oilsands production means it has continued to grow through the worst of the low oil prices. US tight oil is more price responsive. But more firm prices are expected as the market begins to move out of surplus, which will incentivise investment for this new short cycle oil once again.”

The distinct nature of oilsands and tight oil growth has also contributed to further integration of the North American oil market, the report says. Oilsands in Canada are most compatible with refineries geared to process heavy crudes, such as those in the US Midwest and US Gulf Coast, while tight oil is most attractive to those that process light crude, such as Canada’s eastern refiners.

US light crude exports to Canada increased 400 000 bpd 2009 - 2015, while US imports of Canadian heavy oil, primarily from the oil sands, increased 1.2 million bpd during the same period. Canada now accounts for about 40% of total US crude imports.

“Oilsands and tight oil may compete for capital, but not for markets,” said Kevin Birn, Director of IHS Energy and head of the Oils Sands Dialogue. “In terms of meeting North American refinery demand, they represent complementary rather than competing types of crude. The integrated North American oil trade allows Canada and the US to achieve a greater energy security than either could accomplish individually.”

The report concludes that there is potential for even greater trade, integration and energy security between Canada and the US in the future, with particular potential for Canadian oilsands to replace even more offshore imports of heavy crude to the US.

North America imported significant volumes, about 2 million bpd, of heavy sour crude similar in quality to the oilsands, with nearly 90% going to the US Gulf Coast. Refineries there face an uncertain future from their historical suppliers, notably Venezuela, the report says. Venezuela, facing economic collapse and moving deeper into crisis, currently exports over 800 000 bpd to the US.

Adapted from press release by Francesca Brindle

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