STUDY NO. 191 AUGUST 2020 CANADIAN OIL SANDS PRODUCTION AND EMISSIONS OUTLOOK (2020-2039) 3512 - 33 Street NW, #150, Calgary, AB T2L 2A6 350 Sparks Street, #805, Ottawa, ON K1R 7S8 403.282.1231 | www.ceri.ca | [email protected] @ceri_canada Canadian Energy Research Institute CANADIAN OIL SANDS PRODUCTION AND EMISSIONS OUTLOOK (2020-2039) Canadian Oil Sands Production and Emissions Outlook (2020-2039) Author: Dinara Millington Recommended Citation (Author-date style): Millington, D. 2020. “Canadian Oil Sands Production and Emissions Outlook (2020-2039).” Study No. 191. Calgary, AB: Canadian Energy Research Institute. https://ceri.ca/assets/files/Study 191 Full Report.pdf Recommended Citation (Numbered style): D. Millington, “Canadian Oil Sands Production and Emissions Outlook (2020-2039),” Canadian Energy Research Institute, Calgary, AB, Study No. 191, 2020. URL: https://ceri.ca/assets/files/Study 191 Full Report.pdf Copyright © Canadian Energy Research Institute, 2020 Sections of this study may be reproduced in magazines and newspapers with acknowledgment to the Canadian Energy Research Institute August 2020 Printed in Canada Acknowledgements: The author of this report would like to extend her thanks and sincere gratitude to all CERI staff that provided insightful comments and essential data inputs required for the completion of this report, as well as those involved in the production, reviewing and editing of the material, including but not limited to Hamid Rahmanifard, Toufigh Bararpour, Allan Fogwill and Kelsey Marklund. ABOUT THE CANADIAN ENERGY RESEARCH INSTITUTE Founded in 1975, the Canadian Energy Research Institute (CERI) is an independent, registered charitable organization specializing in the analysis of energy economics and related environmental policy issues in the energy production, transportation, and consumption sectors. Our mission is to provide relevant, independent, and objective economic research of energy and environmental issues to benefit business, government, academia, and the public. For more information about CERI, visit www.ceri.ca. CANADIAN ENERGY RESEARCH INSTITUTE 150, 3512 – 33 Street NW, Calgary, Alberta T2L 2A6 Email: [email protected] Phone: 403-282-1231 Canadian Oil Sands Production and Emissions Outlook (2020-2039) iii Table of Contents Table of Contents ......................................................................................................................................... iii List of Figures ............................................................................................................................................... iv List of Tables ................................................................................................................................................. v Acronyms and Abbreviations ....................................................................................................................... vi Executive Summary ..................................................................................................................................... vii Chapter 1: Introduction ............................................................................................................................. 11 Organization of the Report ..................................................................................................................... 11 Chapter 2: Oil Sands Industry Update ......................................................................................................... 12 Background ............................................................................................................................................. 12 Chapter 3: Oil Sands Production Scenarios ................................................................................................. 18 Methodology and Assumptions .............................................................................................................. 18 Global Demand Assumptions ................................................................................................................. 18 Production Loss Scenario Assumptions .................................................................................................. 19 Oil Sands Production – Three Scenarios ................................................................................................. 20 Emissions ................................................................................................................................................ 24 Chapter 4: Conclusions ............................................................................................................................... 26 Bibliography ................................................................................................................................................ 27 Appendix A: Production Forecasting Methodology .................................................................................... 28 Delay Assumptions ................................................................................................................................. 28 August 2020 iv Canadian Energy Research Institute List of Figures Figure E.1: Bitumen Production Scenarios ................................................................................................. viii Figure E.2: Bitumen Emission Scenarios ....................................................................................................... x Figure 2.1: Canadian Crude Exports to the US ............................................................................................ 13 Figure 2.2: Canadian Crude Exports by US PADD Region ........................................................................... 14 Figure 2.3: Total Operating Costs for In situ and Mining Projects (2019 C$/bbl) ....................................... 16 Figure 2.4: Emission Intensities by Project (kgCO2eq./bbl bitumen*) ....................................................... 17 Figure 3.1: Bitumen Production Scenarios.................................................................................................. 22 Figure 3.2: Bitumen Production by Project Type (All Scenarios) ................................................................ 23 Figure 3.3: Bitumen Emission Scenarios ..................................................................................................... 25 August 2020 Canadian Oil Sands Production and Emissions Outlook (2020-2039) v List of Tables Table 3.1: Scenario Assumptions for Global Demand................................................................................. 18 Table 3.2: Scenario Assumptions for Canadian Oil and Gas Production..................................................... 19 Table 3.3: Oil Production Shares for Canadian Provinces ........................................................................... 20 Table 3.4: Bitumen Production Losses (KBPD) ............................................................................................ 21 Table A.1: Project Delay Factors ................................................................................................................. 29 August 2020 vi Canadian Energy Research Institute Acronyms and Abbreviations AER – Alberta Energy Regulator BPD – barrels per day CAPP – Canadian Association of Petroleum Producers CERI – Canadian Energy Research Institute CO2eq. – Carbon Dioxide equivalent GDP – Gross Domestic Product GHG – greenhouse gas IEA – International Energy Agency KBPD – thousand barrels per day MMBPD – million barrels per day MT or Mt – mega-tonne OPEC - Organization of the Petroleum Exporting Countries SAGD - Steam-Assisted Gravity Drainage SCO – Synthetic Crude Oil SGER - Specific Gas Emitters Regulation SOR – Steam to Oil Ratio TIER – Technology Innovation and Emissions Reduction Regulation US – United States US EIA – US Energy Information Administration US PADD – United States Petroleum Administration for Defense Districts USGC – United States Gulf Coast WCS – Western Canadian Select WTI - West Texas Intermediate August 2020 Canadian Oil Sands Production and Emissions Outlook (2020-2039) vii Executive Summary The health emergency caused by the COVID-19 pandemic is having a severe adverse impact on the global economy. In fact, this period is being equated to the state of the economy witnessed during the 1930s Great Depression (IEA 2020). At the time of writing, it was still unclear how long the current health crisis will continue and how deeply it will impact economic growth, employment, trade, social behaviour, and capital investment. The energy sector, among other economic sectors, is continuing to feel the impact of the pandemic on energy demand, investment and employment. Highly volatile oil and gas prices are of particular concern for countries where the production and exports of crude oil and natural gas are important drivers for economic growth and government revenues. Even before the pandemic, the decline in global oil prices, surging crude inventories and geopolitics have had an impact on the crude oil industry and slowed the pace of upstream investment around the world– including oil sands development in Canada. The global market remains volatile, as witnessed by temporary negative oil prices in April. There are early signs of improvement but, the recovery ahead is a long road filled with uncertainty. Indeed, prices have recovered from the negative territory; at the time of writing, WTI price was almost US$41/bbl while Brent was trading