Oil sands, the workhorse of Alberta’s — and Canada’s — crude oil production growth, achieved a record production year in 2021. A steady turnaround in crude oil prices, improved market access, and the tried-and-true resilience of oil sands producers combined to drive the increase in output. With 2022 barely out of the starting blocks, the oil sands players have provided production guidance for this year that, if fulfilled, could set the oil sands on track for another year of record output. In today’s RBN blog, we consider the latest production guidance estimates and what these could mean for the availability of oil pipeline export capacity from Western Canada.
With benchmark crude oil prices reaching seven-year highs in the past two weeks, the remarkable turnaround in crude oil prices has not gone unnoticed by Alberta’s oil sands producers. Seeking to capitalize on their corporate resilience, lower cost structures, and the improved market conditions, these producers are starting to gear up for increased output. This apparent oil sands renewal comes after what has been several years of very tumultuous conditions for Western Canada’s most important industry.
We have documented the enormous ups and downs of the oil sands sector in RBN blogs, covering a gamut of factors that have helped to forge that aforementioned resilience. In the past few years, issues such as enormous price discounts for Western Canadian Select (WCS), the flagship heavy oil price marker, due to insufficient export pipeline capacity eventually resulted in production curtailments being imposed by the Alberta provincial government at the start of 2019. These fell most heavily on the shoulders of oil sands producers. Those price differentials promptly narrowed, but then oil sands producers, still smarting from the curtailments, had to endure the massive COVID-driven price disruptions and short-lived Saudi-Russia oil price war in early 2020. These resulted in a major meltdown for crude oil prices and single-digit WCS prices to boot, bringing about significant production shut-ins as a result. Once oil prices began to recover, so did oil sands production, which we covered in our four-part Never Say Goodbye series.