Oil-related investments are expected to drop 17% this year, according to the International Energy Agency.
CALGARY — Growth in Canadian oil production is likely to slow down or grind to a halt five years from now once projects now under construction are built, the International Energy Agency warns in a report released Feb. 22.
The Paris-based organization said it projects Canada to add 800,000 barrels a day of production by 2021, which would bring total output to 5.2 million barrels a day. Most of that growth is expected to come from Alberta’s oil sands, with bitumen production expected to hit 3.4 million barrels a day.
But a number of factors including the expense of producing crude from the oil sands threaten to curtail or put a stop to such growth, the IEA said.
“Heightened environmental concerns, a lack of pipeline access to new markets and the unknown impact of the victory by the New Democratic Party in Alberta’s elections last year are causing companies to slow development,” it said.
“As such, we are likely to see continued capacity increases (in) the near term, with growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed.”
A number of new developments in Canada recently commissioned or nearing completion will drive growth over the next five years, the IEA said. They include Imperial Oil’s Kearl expansion project in Alberta, which was completed in June 2015, and the Hebron offshore oil site off Newfoundland set to begin production in 2018.
The IEA report, which examined global oil production forecasts up to 2021, said there was a 24% cut in oil investment around the world last year and another 17% reduction is expected this year.
Jackie Forrest, vice-president of energy research at Arc Financial, agreed that oilsands development will slow down as companies look to smaller investments and faster returns.
“There is a lot of uncertainty about future growth and a lot of headwinds coming at the oil sands,” said Forrest. “Even if you assume a price recovery, there’s more of a favour for shorter cycle-type projects, unlike the oil sands which are megaproject investments.”
A decline in the number of new projects would significantly change the dynamics of the oil sector’s workforce from growth to maintenance, the industry-funded Enform organization said last week.
It projects that the number of construction jobs will drop by 84%, or about 10,300 positions, by 2020, while the number of operations and maintenance jobs would grow by 9,870.
Since mid-2014, crude prices have plunged by 70%.
© 2016 The Canadian Press