Sales of drilling rights in Alberta’s oil sands are declining, reversing a previous boom. This drop is linked to President Trump’s tariffs and the resulting fall in oil prices. The situation worsened after OPEC+ decided to end its production cuts sooner than expected. Despite this, Canada’s oil production outlook remains positive.
Land prices in Alberta’s oil sands have fallen 18% from last year, now at about C$771 ($561) per hectare, Bloomberg reported. This drop reflects a broader 25% fall in land lease prices and is partly due to the impact of the U.S.-China trade war.
The tariff conflict raised fears of a global recession, pushing oil demand and prices down. Canada also imposed tariffs on U.S. goods, which increased costs for the Canadian energy sector. These came on top of existing expenses related to emission regulations.
Energy companies in the U.S. are also tightening budgets and waiting for prices to recover. Still, the outlook for Alberta’s oil sands shows significant production growth ahead.
S&P Platts projects oil sands output to grow between 500,000 and 3.8 million barrels per day from now until 2030, according to Bloomberg’s Robert Tuttle. The International Energy Agency (IEA) also forecasts record Canadian oil production, noting that improving and optimizing oil sands operations will add barrels.
Both reports predate Trump’s presidency, so the outlook may shift. However, production is currently rising, and exports to China are increasing thanks to the expanded Trans Mountain pipeline.
The Trans Mountain expansion faced years of delays and strong opposition from environmentalists and provincial authorities. It was completed last year and now transports more crude from Alberta’s oil sands to Canada’s West Coast. From there, the oil heads to Asian markets. Interestingly, China became the largest buyer of Canadian crude after imposing tariffs on U.S. oil in response to Trump’s trade policies.
Despite this, lower land prices suggest that demand for new drilling rights remains weak. Current shipments to China stand at just over 200,000 barrels per day, about one-fifth of the pipeline’s expanded capacity of 890,000 barrels per day, according to Kpler data. Still, the pipeline operator plans further capacity increases, anticipating future demand growth.
Enbridge is also considering raising its Main Line pipeline capacity by 150,000 barrels per day, Bloomberg reports.
So, while oil and lease prices are falling, pipeline operators expect production to rise. This may seem contradictory but makes sense because producers can offset lower prices by increasing output where costs are manageable.
Natural gas also plays a role. Canada’s large untapped gas reserves will see more drilling amid strong demand growth, especially in the Montney shale formation.
Overall, Alberta’s oil sands will continue to grow despite falling lease prices. Local producers have become skilled at maximizing output from existing fields, helping sustain production levels even in challenging market conditions.
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