Canada Oil and Gas Report Q2 2009

Abstract

The new Canada Oil & Gas Report from BMI forecasts that the country will account for 10.47% of
North American regional oil demand by 2013, while contributing 36.28% to supply. In North America,
overall oil consumption reached an estimated 21.68mn barrels per day (b/d) in 2008. It is set to rise to
around 21.78mn b/d by 2013. North American regional oil production in 2008 averaged an estimated
10.18mn b/d. It is set to rise to 11.30mn b/d by 2013.
In terms of natural gas, North America in 2008 consumed an estimated 754bn cubic metres (bcm), with
demand of 807bcm targeted for 2013, representing 7.5% growth. Production of an estimated 731bcm in
2008 should rise to 726bcm in 2013, which implies net imports rising to some 81bcm by the end of the
period. Canada’s share of gas consumption in 2007 was 12.63%, while it contributed 25.31% to regional
production. By 2013, its share of gas consumption is forecast to be 12.79%, with 25.62% of regional
supply.
In terms of the OPEC basket of crudes, the average price in Q4 2008 was an estimated US$52.53 per
barrel (bbl), down sharply from the US$113.49 recorded during the previous three months. The full-year
2008 average is put by BMI at US$94.08/bbl, representing a 36% year-on-year (y-o-y) increase. North
Sea Brent, WTI and Russian Urals are believed to have averaged US$97.06, US$99.33 and US$94.56/bbl
respectively during 2008. For 2009, we are now assuming an average OPEC basket price of US$52/bbl (-
45% y-o-y), with Q109 expected to deliver US$40.00. The new full year forecast implies Brent crude at
US$55.65, WTI averaging US$56.63/bbl and Urals at US$52.48 for 2009. For 2010, we expect to see a
recovery to US$58.00/bbl for the OPEC price, gaining further ground to US$65.00 in 2011 and
US$70.00/bbl in 2012. We are now using a long-term price assumption of US$70.00 for 2013-2018,
down from our previous assumption of US$90.00/bbl.
In 2009, we see monthly average global wholesale gasoline prices ranging from US$38.90 in January to a
high of US$64.90 reached in August and in December, providing a full-year average of US$56.20 – just
over 55% of the 2008 outturn. The 2009 BMI gasoil forecast is for an average price of US$67/bbl,
assuming a monthly low of US$46.40 in January and a high of US$77.30/bbl in December. The full-year
outturn represents a 45% downturn from the 2008 level. For 2009, the monthly average jet fuel price is
forecast to range from US$47.90 in January to US$79.80/bbl in August, proving an annual level of
US$69.20/bbl.
Canadian real GDP is forecast by BMI to fall by 1.4% in 2009, down from growth of an estimated 0.6%
in 2008. We are assuming an average annual 2.4% growth in 2009-13. The country’s oil demand is
expected to average 2.26mn b/d in 2009, before rising to 2.28mn b/d by 2013. Oil output looks set to
reach 4.10mn b/d by 2013, subject to oil sands development. The Canadian Association of Petroleum
Producers (CAPP) predicts that oil sands production will reach 3.5mn b/d by 2015 and 4.0mn b/d by
2020, accounting for more than 80% of Canadian oil production.
Between 2007 and 2018, we are forecasting an increase in Canadian oil production of 23.9%, with output
rising steadily from an estimated 3.25mn b/d in 2008 to 4.10mn b/d at the end of the 10-year forecast
period. Given oil consumption forecast to decrease by 1.6%, exports should rise from an estimated
0.97mn b/d to 1.83mn b/d during the forecast period. Gas production should fall from the estimated 2008
level of 185bcm to 168bcm in 2018. Demand is forecast to rise from 95bcm to 111bcm, leaving net
exports falling to 57bcm, largely to the US. Details of BMI’s 10-year forecasts can be found in the
appendix to this report, which provides global, regional and country-specific projections.
BMI’s long-term political risk rating for Canada is 94.3, well above the Developed Markets average of
85.8, and behind only Norway. Our long-term economic risk rating is 70.4, which compares with a
Developed Markets average of 68.9 and puts Canada well ahead of the US and most developed European
countries. Canada has a privatised energy sector that boasts a large, competitive upstream oil and gas
segment featuring domestic independents and integrated companies, plus direct and indirect participation
by international oil companies (IOCs). The downstream segment is shared by IOC-controlled domestic
companies and former state company Petro-Canada, which Suncor agreed to acquire for CAD19.6bn
(US$15.9bn) in March 2009.