Canadian oil sands production will continue to grow through next year despite low crude prices, according to a report by the Energy Information Administration (EIA). Production growth will be sustained by projects that were launched before prices began to fall in 2014, EIA said.
Oil sands crude has traded at $15-20 lower than West Texas Intermediate since 2014, suggesting many projects are operating at a loss. Nevertheless, EIA said, ongoing projects will continue because they were designed to operate for three or four decades and can withstand oil price volatility. Additionally, the cost to shut down an oil sands project can range from $500 million to $1 billion.
EIA expects some new projects to start up this year, but many more will be delayed until crude prices recover.
Analysts believe the Canadian oil sands industry could see a wave of merger and acquisitions as producers seek efficiencies in the low-price environment. Several producers have cut jobs and reduced spending in order to ride out the downturn.
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