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TORONTO – Facing a rising tide of United States tight oil production, Canada’s up-and-coming oil sands producers aren’t afraid of drowning.
Often referred to as ‘the tight oil renaissance’, recent reports have pointed to the rapid growth of production coming from new U.S. resource plays as a major cause for concern over the future competitiveness of upcoming northern Alberta oil sands projects. Yet emerging companies attending the Peters & Co. Ltd. 2012 Energy Conference here remain optimistic their heads will remain above the surface.
Total U.S. oil production is expected to exceed 10 million barrels per day by the end of the decade, according to some estimates, with much of the growth coming from new unconventional plays such as the northern Bakken or the southern Eagle Ford.
The boom has raised questions about the demand for oil imports from Canada’s best energy customer as the U.S. currently gets nearly half the oil it consumes from abroad. However, Glen Schmidt, chief executive of Laricina Energy Ltd., questions whether that ambitious growth will actually materialize.
“Time and experience have taught us to temper initial extrapolations for our oil sands, in Brazil and in other oil plays,” he said in his presentation at the conference. “I would expect that tight oil will be the same.”
Meanwhile, his Calgary-based company’s Saleski pilot is leading development of the Grosmont oil sands play southwest of Fort McMurray, believed to contain up to the equivalent of 450 billion barrels of oil. According to GLJ Petroleum Consultants in Calgary, Laricina is one of the four emerging oil sands producers with more than five billion barrels of recoverable oil resources.
“Using even the most optimistic tight oil supply forecast we see in the North American supply the U.S. is still expected to require crude imports,” Mr. Schmidt said. He acknowledged U.S. oil imports will likely decrease overall in the coming years, though he points to the latest IHS CERA forecast to note light and sour-grade crudes will be displaced by growing U.S. domestic production before heavier grades such as oil sands crude.
“We do not see tight oil displacing heavier crude imports at all,” he said.
Side-by-side comparisons of the two competing resources have already shown oil sands projects can compete with U.S. tight oil. Jeff Martin, Peters’ managing director of research, recently published a study comparing a typical 30,000 barrel-per-day project in the Eagle Ford in south Texas with an oil sands project of similar size and found “a competitive result” for oil sands projects with a steam-to-oil (SOR) ratio of 3.5 and “excellent comparatives” for projects with an SOR of 2.5.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/09/11/despite-u-s-tight-oil-renaissance-optimism-pervades-canadas-oil-sands-sector/