2012-10-27 18:28:44 - Recently published research from Business Monitor International, "Canada Oil & Gas Report Q4 2012", is now available at Fast Market Research

BMI View: Production from oil sands will continue to drive Canada's oil production growth. However, exploration in the country's offshore acreage and unconventional resources could prove-up more oil and gas reserves to support the country's long-term growth prospects. The outlook for Canada's oil and gas industry is still a rosy one, though its upstream potential needs more support from infrastructure development.

The main trends and developments we highlight for Canada's oil and gas sector are:

* Production from oil sands shows no sign of abating. With major oil sands projects such as ConocoPhilips and Total's Surmount and Total's Joslyn North due to come online, and as Shell increases output at its Abathasca Oil Sands Project, oil sands output is set to

remain strong and drive production in the next decade. A boom in tight oil production from the Bakken formation in Saskatchewan and similar formations in Alberta will contribute to this surge. We expect oil production to increase from an estimated 3.71mn barrels per day (b/d) in 2012 to 4.40mn b/d in 2016. By 2021, total oil production could hit 4.97mn b/d.
* Gas production will initially fall owing to declining conventional output - especially in Alberta and Saskatchewan - from an estimated 149.9bcm in 2011 to 148.7bcm in 2012. Thereafter, we expect a reverse in this trend as shale gas output growth, particularly from British Columbia, outstrips conventional decline elsewhere in Canada. We have revised our forecast for gas production upwards, and project that it will increase to 157.0bcm in 2016 and reach 171.7bcm by 2021.
* While existing oil and gas reserves continue to deplete as fields mature, successes in unconventional and offshore exploration could prove-up reserves, posing an upside risk to our forecasts. In June 2012, Apache Corporation claimed that it made the world's largest shale gas discovery in the Liard Basin, British Columbia, with recoverable natural gas estimates at 1.34trn cubic metres (tcm). Statoil also confirmed following a discovery at its Mizzen prospect, offshore Newfoundland, that it could hold 100-200mn barrels of oil equivalent (boe) of recoverable resources.
* Gas demand will rise as the proportion of gas increases in Canada's energy mix. Consumption growth will also be propelled by the rising energy use at the oil sands facilities, as gas powers much of the oil sands production. Gas consumption is set to grow from 86.8bcm in 2012 to 97.2bcm in 2016. This upward trend will continue, with gas consumption expected to hit 112.6bcm by 2021.
* Asian companies such as Korea Gas Corporation (Kogas), Mitsubishi Corporation and PetroChina have been particularly interested in acquiring unconventional gas assets in Canada. We expect Canada to continue receiving interest from Asian-based companies in gas assets and gas infrastructure. This view has played out, with Petronas launching a takeover bid for Canadian shale gas specialist Progress Energy in June 2012, and CNOOC seeking to acquire Canadian producer Nexen for US$15bn in July 2012.
* The abundance of gas production provides Canada with much export potential. Shell's proposal for a 20.4bcm per year gas liquefaction and export facility in Kitimat, British Columbia is a step in the right direction in building up Canada's export capabilities.
* Canada's oil and gas infrastructure face bottlenecks that need to be addressed to move oil and gas more effectively across the country, and out of it. Otherwise, the country will be faced with the paradox of being over-supplied with oil and gas, but prevented from exporting these due to the supply shortages that exports could pose to the domestic consumption needs of particular regions of the country. However, strong environmental concerns will continue to hinder key projects such as the expansion of the TransMountain pipeline and Northern Gateway pipelines. Planned LNG export terminals are likely to face similar regulatory obstacles.


Full Report Details at
- www.fastmr.com/prod/479386_canada_oil_gas_report_q4_2012.aspx


At the time of writing, we assume an OPEC basket oil price for 2012 of US$107.05/bbl, a downward revision of our original forecast of US$111.47. This will fall to US$99.10/bbl in 2013 and US$93.15/bbl in 2014. Global GDP in 2012 is forecast at 2.03%, down from 2.46% in 2011, reflecting a faltering recovery in the US and an uncertainty with regard to the eurozone debt crisis. For 2013, growth is estimated at 2.32%.

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