Canadian oil production expected to increase despite lower price

Artical Link:http://www.eia.gov/todayinenergy/detail.cfm?id=25112&src=email

Key information.

1. oil sands projects were already under construction when oil price started to fall. those projects are expected to be in production in next few years. 

2. production, 4.5 million barrels perday in 2015; 4.6 million barrels per day in 2016; 4.7 million barrels per day in 2017.

3. WCS benchmark (West Canidian Select) is generally $15-20 low than WTI because

                a. longer disstance to refinery

                b. heavier and lower quality. hard to process it into petroleum products

4. average price of WCS is $18.42 in janaury 2016 which is $15 cheaper then WTI, suggesting oil sands projects may operate at a loss. 

5. however, such projects are designed to operate over 30-40 years and can withstand volatility in crude oil prices. Additinally, the cost to shut down an existing oil sand project to be within the range of $500 million to $1.0 billion, which may exceed the operating losses a producer may experience in the short term.

6. some new projects are expected to come online in 2016, but many more have been postphoned until price increases.