Updated June 2020
Within this section
Total Production
Total combined mined and in situ bitumen production grew less than 2 per cent in 2019 to reach 492.3 thousand cubic metres per day (103 m3/d), or 3.1 million barrels per day (106 bbl/d). Depending on which oil price forecast is used, raw production is forecast to increase to between 634.4 103 m3/d (3992.2 103 bbl/d) and 636.9 103 m3/d (4007.9 103 bbl/d) by 2029. Upgraded production is forecast to rise from 177.1 103 m3/d (1114.5 103 bbl/d) in 2019 to 204.7 103 m3/d (1288.2 103 bbl/d) in 2029.
Production Limit
The Government of Alberta announced its production curtailment rules in December 2018 in response to record-high price discounts between Alberta and other jurisdictional price benchmarks. The discounts were a result of refinery outages in key markets, high storage volumes, and increased crude oil and bitumen production affected by transportation constraints.
These rules took effect in January 2019 and initially only applied to operators that produced in excess of 1.6 103 m3/d (10 103 bbl/d) of production; this threshold was later increased. Limits for each operator in Alberta subject to the limit had their baseline production levels determined by their best single month of production between November 2017 and October 2018.
The curtailment policy was further amended in late 2019 to encourage activity and investment. In particular, the government made the following changes and announcements:
- Exempted volumes were increased in August 2019, from 1.6 103 m3/d (10 103 bbl/d) to 3.2 103 m3/d (20 103 bbl/d).
- In November 2019, the Government of Alberta exempted new drilling for conventional crude oil (any oil produced outside of the oil sands designated areas and formations) from the curtailment program, allowing companies to produce from new wells without the production restriction.
- Effective December 2019, operators were allowed to apply for increased production under the Special Production Allowance if they were able to demonstrate their ability to move volumes with new rail capacity.
- Each operator's maximum rate will continue to be amended each month, subject to changing market conditions; as of December 2019, the monthly production limit for Alberta was 605.4 103 m3/d (3810 103 bbl/d). Given improvements in market access and stable differentials, the government intends to end the production limit on December 31, 2020.
Production growth in 2019 was stabilized by the curtailment orders, but was still supported by operators able to allocate production across multiple projects (mining, in situ, and conventional). Companies also employed other innovative strategies to mitigate effects of production limits, including optimization programs to coincide with turnarounds, using rail service when viable, and purchasing allocations from smaller producers to maximize output.
Consistent with last year's forecast, this year's outlook continues to consider how the production limit impacted production over the past year and will affect near-term investment activity ahead. The mid- to long-term production forecast is projected to increase with the elimination of the curtailment program and operators more inclined to advance projects, subject to takeaway capacity and market conditions.
Market Conditions
Beyond the outcomes of the OPEC-led supply cuts, bitumen production in 2020 is expected to be adversely impacted by the coronavirus disease 2019 (COVID-19) and its effect on oil prices. In direct response to COVID-19 health risks, companies have taken actions to ensure the safety of their employees, including screening, travel restrictions, and self-isolation measures.
Several Alberta producers have also taken measures to lower costs, scale back production, or shut in altogether. Many projects that were considered sanction-ready in 2020 had their final investment decisions deferred beyond this year due to market conditions; maintenance turnarounds and project restarts were also deferred to later dates. Much like the Fort McMurray wildfires in 2016, thermal in situ producers will weigh the risks of short-term economic losses against potential long-term reservoir integrity issues when deciding to shut in.