Keystone, Northern Gateway may alter global ‘crude trade outlook’: OPEC

Canada’s two major proposed oil sands pipelines have the potential to transform the global crude trade outlook, says a report by the Organization of Petroleum Exporting Countries.

And that’s just the tip of the iceberg: Non-conventional supplies will quadruple over the next 25 years and the Canadian oil sands and U.S. shale oil will lead the charge, says OPEC.

TransCanada Corp.’s Keystone XL pipeline and Enbridge Inc.’s Northern Gateway plan have come under fire from environmentalists, but the forecast highlights the oil sands’ tremendous potential, and their ability to be a game changer in the global energy mix.

“In both Canada and the U.S., a combination of domestic crude-oil production growth and a series of pipeline projects is leading to a situation that could have appreciable impacts on international crude oil markets and trade,” says OPEC in its latest World Oil Outlook.

While OPEC notes both proposed pipelines face substantial resistance, it expects Canadian oil sands development to continue, especially if the price of oil stays in its US$85-to-US$95 range forcast over the next decade — an economic sweetspot for both conventional and non-conventional developers.

The U.S. State Department said Tuesday it has opened a “special review” of Keystone XL, which could delay the Canada-to-Texas oil sands pipeline into 2012 or later.

Regulatory hearings on Northern Gateway, set to ship oil to Asia, are due to begin in January.

OPEC, which counts as members some of the world’s biggest oil producers, expects to increase its share of global oil supply 1% by 2035 despite intense competition from non-OPEC and non-conventional developers.

The changes come amid upheavals in the energy mix. According to OPEC, the supply of oil will grow by a mere 0.8% a year until 2035, versus stellar growth in renewables energy sources (7.5%), biomass (3.3%) and gas (2%) during the same period.

Still, oil will remain an important part of the energy mix.

In North America, the Canadian oil sands’s led non-conventional supply will nearly quadruple to 6.6 million barrels per day by 2035, from the current 1.7 million barrels per day, OPEC estimates.

Overall, North American production would rise to 16 million barrels per day by 2035 from 12 million in 2010, despite declining production from conventional oil wells. U.S. and Canadian production could account for nearly 80% of non-conventional supplies by 2035, says OPEC.

Not surprisingly, the cartel is projecting that much of U.S. future oil supply will not come from the Middle East. OPEC even expects some North American (read Canadian) crude finding its way into Asia Pacific, but it will be a razor-thin sliver compared to its own exports to the energy-hungry markets of China, Japan, India and South Korea.

Another major threat hovering on the horizon for OPEC is shale – or tight – oil which could potentially add 300 billion barrels of reserves spread across the U.S., Canada, France, Argentina and the U.K, rivalling Saudi Arabia’s 260-billion barrels of proven oil reserves.

“Despite widespread shale deposits, it is not yet clear whether the availability of economically viable shale oil is as great as that for shale gas,” OPEC notes in the report. “At present, however, shale oil should not be viewed as anything more than a source of marginal additions.”
Financial Post