The Economy of Oil and Gas - Canada will stay top U.S. oil supplier for 20 years

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Canada will stay top U.S. oil supplier for 20 years

Ashok Dutta
CanWest News Service; Calgary Herald
Tuesday, March 06, 2007
CALGARY -Canada - which in 2005 replaced Saudi Arabia as the single-largest supplier of energy to the U.S. - will continue that position over at least the next two decades, thanks to the multi-billion dollar oilsands developments in Alberta.
"The projects in Fort McMurray and Athabasca will ensure that Canada remains in the top spot until 2030," Guy Caruso, administrator of the U.S. Energy Information Administration, said Monday on the sidelines of an industry conference in Calgary.
According to EIA estimates, Canadian exports to the U.S. will reach 2.6 million barrels per day by 2030, compared with current levels of just over one million bpd.
"Oilsands will account for a vast majority of this incremental exports. The remaining volumes will be sourced from the conventional oil sources in Canada," he said.
Since 9/11, the U.S. has been pursuing a policy of reducing reliance on Middle East oil. Until recently, Saudi Aramco was the single-largest supplier of crude oil to the U.S. under a long-term deal offering a favourable lifting and delivery price. That scenario has changed, however.
In an address to the U.S. Congress late last year, President George W. Bush spoke of the need to decrease 75 per cent dependence on Middle East oil due to volatility in the region.
"We will see a growth in supply from not only Western Canada, but also the Middle East. However, the increased demand will be spread over several Arabian Gulf suppliers and not be solely reliant on Saudi Arabia. A majority of Saudi oil is destined for the Asian markets, particularly China and India," Caruso said.
The U.S. is the world's largest consumer of crude oil, estimated to be 22 million bpd. According to the EIA, demand is projected to grow 30 per cent over the next 25 years with fossil fuels catering to a bulk of the new energy requirements.
Caruso revised upwards EIA's forecasts for crude oil prices for 2007 to $50-55 per barrel, compared with $30-35 earlier.
"The main reasons are high investments, particularly in the Middle East, a growing restriction on upstream access to international oil companies to new reserves and rising cost of project development and implementation. In the past five years, capital costs have risen 50 to 60 per cent and this is continuing to soar," he said.
Saudi Arabia, with proven reserves of 267 billion barrels of crude oil, is pursuing mega projects of bringing onstream the Manifa, Shaybah, Khurais and Nuayyim projects by 2010 in the Eastern Province. A staggering $45 billion is being invested to produce about two million bpd new production capacity. By comparison, some $150 billion is earmarked for investment by 2015 in Alberta's 175-billion barrel oilsands to increase output by about 1.5 million bpd.
While U.S. imports of crude oil from Western Canada is set to rise sharply, a different picture emerges for natural gas.
"U.S. consumption of gas by 2030 will increase to 26 trillion cubic feet from current levels of 22 tcf. However, Canadian supplies will go down to 1.2 tcf compared with 3.3 tcf," Caruso said at the CERI 2007 Natural gas Conference.
Prime reasons are low gas prices, which has made drilling and upstream development unattractive, and also the growing need to meet demand emanating from the oilsands projects.
"In the medium-term, we are looking at the Alaskan gas project which we expect to start deliveries in 2018. Gas from the McKenzie Delta will also be very vital," Caruso said.
adutta@theherald.canwest.com
Calgary Herald