U.S. boom in oil production spells peril for Canadian crude – by Nathan Vanderklippe and Paul Koring (Globe and Mail – September 11, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

CALGARY and WASHINGTON — A torrent of oil pumped from new wells across the U.S. is setting in motion a decade of dramatic change that promises to wean the country off OPEC, and threatens the growth of energy imports from Canada.

The U.S. is now staring at an energy future awash with its own crude, with far-reaching consequences for Canada’s oil sands, the U.S. economy and global geopolitics. This massive shift has been sparked by changing political sentiment and technological advances that have allowed crude to be tapped in new places – from North Dakota to Oklahoma, Colorado, Michigan, and even Florida.

The United States, according to new data released Monday by Bentek, a U.S. energy analysis firm, will see its oil production rise nearly five million barrels a day, or 74 per cent, in the next decade.

In that time, reliance on countries outside Canada will largely disappear. The U.S. today imports 45 per cent of its petroleum, half from OPEC countries. But by 2022, Bentek projects, only a million barrels per day will be delivered to U.S. shores by tanker – down from 6.7 million in 2011 and just 5 per cent of total demand – and at least some of those won’t come from OPEC, but from countries like Mexico and Brazil.

The coming change, according to Bentek, is startling: By 2016, the U.S. will surpass its 1970 oil production peak of 9.6 million barrels a day; by 2022, it will have leapt to 11.6 million barrels a day.

For Canada, the news is both good and grim: Canadian crude, flowing by pipeline, will continue to be a substantial source of U.S. energy. But growth in Canadian exports south of the border could face a wall in 2018, when the combination of U.S. oil output and pipeline constraints raise the possibility for new “Canadian production to get pushed out,” said Jodi Quinnell, one of the Bentek report authors. “What comes in to the U.S. will slow and basically remain flat from 2018 to 2025.”

That projection suggests the coming half-decade will see Canada, and its fast-growing oil sands, struggle against the tide of U.S. oil. It also substantially raises the stakes for a country in the midst of two contentious applications to carry Canadian crude to the British Columbia coast for export to Pacific markets. It should “cause us to, even more than we are today, realize the importance of creating additional channels to the world,” said Wayne Chodzicki, the Calgary-based global head of oil and gas for consulting firm KPMG.

The Bentek projection is, however, an ambitious one, surpassing the 2022 expectations of the federal U.S. Energy Information Administration by a full five million barrels per day, although the EIA forecast is in the midst of an upward revision. And the Canadian oilpatch expects U.S. growth to be substantially slower than Bentek suggests, in part because of the difficulty in building the new pipelines and rail cars to move that much new oil. Plus, U.S. companies are in the midst of a boom, and may need to take a break.

“I think there will be a pause or at least a partial slowdown over the next two or three years to drive costs down. So the growth profile won’t be as strong,” said Scott Saxberg, the chief executive of Crescent Point Energy, a Calgary company with wells in North Dakota that provides it a window on U.S. activity.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/us-boom-in-oil-production-spells-peril-for-canadian-crude/article4535525/

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