Current status and challenges of the Canadian oil sands industry

Abstract

Canadaʼs crude oil production is the fourth largest in the world （4.6 million bbl/day in 2018）. The rapid production increase since 2000 is due to the development of the oil sands. The key technological developments for insitu recovery from the oil sands began with the development of the steam assisted gravity drainage （SAGD） process and horizontal well drilling technology allowing for the accurate placement of shallow wells （1980s）. With a growing awareness of the environmental impacts of all industries, the Canadian oil sands producers have been actively working on technological innovations that increase production efficiency and reduce greenhouse gas（GHG）emission intensity. The sharp drop in oil prices in 2014 also served to increase the focus on efficiency and cost reduction.

With the large increase in production, export pipeline capacity has not kept up and production capability exceeds takeaway capacity in Western Canada. Approximately 80％ of Canadian crude is exported to US refineries, but despite strong demand for heavy crudes in US markets, Alberta production has experienced significant discounts due to the lack of transportation. In late 2018, the discount for Canadian heavy crudes became so large that the Alberta Government took the unusual step of issuing an order to curtail production to bring prices closer to fair market value - value that reflected the pricing in the end markets for Albertaʼs products. The construction of new pipelines requires a lot of dialogue with environmental groups, local governments, and indigenous people, and progress is slow. Railroad transportation and refinery expansion in Canada are being promoted in parallel to help reduce the imbalance between production and takeaway capacity. This paper discusses the ongoing development of oil sands technology, the current status of our subsidiary company（JACOS）, and the market environment and challenges of the Canadian oil sands industry.