Thus far, Canada is estimated to have shut-in oil production of at least 325 000 bpd, followed by Iraq (300 000 bpd), Venezuela (235 000 bpd) and Brazil (200 000 bpd). Although the US is also likely to be shutting-in hundreds of thousands of barrels of production as well, numbers are not yet official and are not included in our estimates.
“Due to the severity of demand destruction in North America in April and May, we estimate that shuttered oil sands and heavy oil curtailments in Western Canada could exceed 1.1 million bpd in 2Q020, with additional near-term downside risk,“ said Rystad Energy’s senior analyst Thomas Liles.
Rystad's curtailment forecasts for the rest of the year have increased to 513 000 bpd for 3Q20 and 293 000 bpd for 4Q20.
In March Rystad predicted that Western Canadian crude storage was likely to approach maximum capacity by the end of the month at then-current production rates. Movements in benchmark Canadian oil prices since 1 April appear to corroborate mounting pressure on in-basin storage capacity, with lighter Canadian benchmark prices decoupling from WTI over the past week.
Murmurings from midstream players have underscored the strain on storage capacity and the production cuts this has already brought. Recent communication from upstream players has also highlighted the storage conundrum and all but assured deeper near-term cuts.
“Additional oil sands downside” represents a scenario in which non-upgraded mining projects and higher-cost thermal projects are taken completely offline. Rystad's near-term projections for large thermal projects are not as steep as mining, given the need to maintain thermal reservoir integrity and the greater technical ease with which mining projects can adjust short-term output. As such, Rystad's current estimates indicate that the majority of near-term curtailments will come from mining projects.
“In any case, Western Canada’s chronic lack of storage capacity was guaranteed to emerge as a key constraint on upstream volumes in a low-demand environment. As with the recent decoupling in light benchmark prices, the experience for Canadian producers will probably remain “decoupled” from any positive surprises from the OPEC+ meeting on 9 April or any other potentially positive news surrounding global near-term supply developments,“ Liles concluded.
Read the article online at: https://www.oilfieldtechnology.com/special-reports/13042020/canada-most-affected-by-shut-ins-so-far-according-to-rystad-energy/
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