The sombre mood that has gripped the Calgary-based oilpatch for several years is starting to show a few signs of lifting thanks to some good news on export pipelines and the end of Alberta’s oil production limits.
Observers say the start of construction on the Minnesota portion of the Enbridge Line 3 replacement pipeline after six years of delays has lifted spirits, along with the advance of construction on the Trans Mountain pipeline expansion, with one expected to open in 2021 and the other by the end of 2022.
Meanwhile, the Alberta government earlier this month ended its oil production curtailment program after nearly two years, reacting to a better balance between crude production and pipeline take-away capacity, which supports local price levels and provincial royalty revenues.
Canadian Natural Resources says the end of the program helped it decide to boost production by five per cent on higher spending in 2021.
Whitecap Resources CEO Grant Fagerheim says he’s optimistic as his company works on closing deals to buy rivals TORC Oil & Gas and N-A-L Resources. He says producers can make money from existing wells at current benchmark oil prices of about US$45 per barrel, but he’s hoping prices will jump to $50 to $60 to make it worthwhile to spend money on new wells.
Analysts with RBC and Goldman Sachs expect average daily crude oil production in Western Canada in 2021 to regain almost all of the volumes lost this year because of the pandemic.
RBC estimates that WTI crude will average US$46.15 per barrel in 2021 and US$49.75 in 2022 after averaging US$38.77 per barrel this year.