more gradually, to 5.5 million barrels/day by 2006. However, prolonged political strife inside the country and a major oil workers strike in 2003 not only discouraged further investment by foreign companies (which were already discouraged by rising tax rates) but also left much of Venezuela’s oil industry infrastructure damaged, lowering its potential to produce and refine crude oil. Venezuela’s oil production capacity was already dropping during recent years given constraints on investment capital and a tough geological decline curve at aging fields, but damage sustained during the oil workers strike and near civil war in the country led to a more rapid reduction in sustainable capacity to 2.2 million barrels/day at the end of 2003, down from a peak of 3.7 million barrels/day in 1998.
Saudi Arabia may face a new challenge to its U. S. market share from a regional exporter, but this time north of the border. Analysts for the kingdom’s oil industry say that they are watching with concern the rising output profile for Canada. The start-up of new tar oil sands projects and other offshore projects has put Canada on track for the largest jump in oil output in several years, despite lower capital spending by industry that is often cited as evidence that production will decline. Canada’s production has increased from 2.155 million barrels/day in 2000 to 2.3 million barrels/day in mid-2003.
Companies have spent more than $7 billion in oil sands projects since 1996 and are expected to allocate an additional $25 billion by 2007. Production, which has already reached 800,000 barrels/day, could rise to 1.5 million barrels/day or more by 2010 if currently proposed projects meet their targets (Table IV).
The potential for Canadian heavy crude and oil sands development is huge. Of the 2.5 trillion barrels of crude bitumen (oil sands) resources in place in Canada, approximately 12% (or 300 billion barrels) is thought to be recoverable, a figure comparable to the proven reserves of Saudi Arabia. This is in addition to extra heavy oil resources. In Venezuela, where some U. S. oil companies are working on heavy crude upgrading projects, more than 1.2 billion barrels of bitumen are thought to exist.
During past decades, the high costs of mining and processing tar sands and extra heavy crude oil were somewhat prohibitive at approximately $21 per barrel. But engineering and technological advances are lowering costs rapidly. Analysts estimate that oil sands projects ‘‘all in’’ costs (i. e., investment and operating) have fallen to as little as $8 to $9 per barrel and could fall to $6 to $7 per barrel during the coming years as industry continues to make new advances. However, cost variables in Canada have been somewhat unstable given a tight labor market, and cost overruns have been seen at several of Canada’s top existing oil sands projects, including Syncrude, Athabasca, and Millennium.
African supply may also become a key focus of efforts by the West to diversify away from the Middle East. Of the 14.5 million barrels/day of exports projected to be needed from Africa or the Middle East by 2010 in the Atlantic Basin market to fill its supply gap, at least half will be able to be sourced from Africa and North Africa. Angola, a non-OPEC producer, is projected to see increased production, from 750,000 to more than 2 million barrels/day by
Approved Canadian Oil Sands Projects
Source. Petroleum Argus newsletter. aProposed for 2013.
2010, as new fields are developed in its deep offshore zone at full-cycle costs of between $3 and $5 per barrel. Chinese national oil companies are also showing interest in African upstream investment, with CNPC already firmly planted in Sudan and Chinese companies showing expanded interest in Nigeria, Chad, Niger, Equatorial Guinea, Algeria, Tunisia, and Libya.