Deferred and cancelled oilsands projects could result in 300,000 fewer barrels a day flowing from northeast Alberta by 2017, the Canadian Association of Petroleum Producers (CAPP) said Friday.Indeed, two Canadian companies have trimmed 2009 cap-X by over $3 billion. Experts still predict Canadian oil sands production increasing from 1.3 to 2.0. million barrels/day by 2011--but the investment slowdown means that Canada will fall short of the 3.0-3.5 million barrels/day that had been forecast by 2015.
The industry association expects oilsands spending to drop more than 25 per cent, to $16 billion in 2009 from a previous estimate of more than $20 billion. Overall upstream spending - including the East Coast offshore - is expected to fall about 15 per cent to $43 billion from $50 billion in 2008, said Greg Stringham, the group's vice-president of markets and fiscal policy.
A day after Total Canada withdrew a regulatory application for the 115,000-barrel-a-day Northern Lights project, CAPP may be forced to trim its long-term production forecasts for the oilsands when it conducts its annual survey in February, he added.
"Clearly we're on our base case, moderate growth position," Stringham.
Hit by a trifecta of falling oil prices, soaring costs and the lingering fallout from the financial crisis, big oil and gas producers are slamming the brakes on spending to preserve cash and strengthen balance sheets while they weather the ongoing financial storm engulfing the world economy.
This, of course, is the dilemma of both new fossil fuel fields and alternative energy development: Pumping crude from under Arabian and Iraqi deserts costs under $5/barrel; oil sands/shale, new off-shore drilling, and all renewable sources costs well more. Falling oil prices--or, what is the same thing, increased OPEC production quotas--can wipe-out alternative capital investments at a stroke.
This, I think, is the principal energy market failure, and the sole area where (departing from MaxedOutMama) I support government intervention. Not a gas tax, but perhaps forward government energy purchases to keep energy projects active during periods of falling crude prices. It's better than rooting for the OPEC cartel to cut supply.
(via Instapundit, FuturePundit)