Canada’s oil-sands companies including Devon Energy Corp., Suncor Energy Inc. and Cenovus Energy Inc. have ramped up operations and production. Their thermal production sites are running as much as 30 percent above capacity this year, squeezing barrels from existing production sites to maximize revenue.
Oil sands will be second to shale as the biggest contributor to global supply growth over the next two years with half a million barrels a day of production scheduled to enter the market, according to IHS Energy.
Canada oilsand producers are driving down costs.
Devon’s Jackfish oil-sands wells pumped 128,000 barrels a day in April, 23,000 over the stated capacity, Alberta Energy Regulator data show. Suncor has reduced bottlenecks at its Firebag site, which produced above its 180,000-barrel-a-day capacity for two of the first four months of the year. Cenovus’ Christina Lake Phase F, which began operation last year, topped 50,000 between November and March.
Oil-sands producers are running equipment at full throttle as projects sanctioned before the price collapse ramp up. Suncor’s Fort Hills mine and Canadian Natural Resources Ltd.’s Horizon expansion are scheduled to start this year.
With margins shrinking, oil companies are seeking to eke out as much as they can from operations to compensate for smaller margins, a factor helping encourage oil sands producers to push their machinery, Birn said.
The drive for efficiency, along with lower gas prices, has driven the average break-even operating cost on thermal oil sands to less than $10 a barrel from about $15 in 2014, Birn said. Expanding or building a site requires a price of $50 to $60 because of the up-front investment required.
Even with capital spending in the oil sands dropping to C$15 billion this year, less than half what it was in 2014, Western Canada’s oil sands production will rise by 720,000 barrels a day to 3.12 million in 2020 as conventional production in the region stays little changed at 1.2 million, according to CAPP.