CALGARY – Consultancy Wood Mackenzie says Canadian oil producers are among the very few globally who have reduced output in the face of low oil prices.
Wood Mackenzie says it found that only about 100,000 barrels a day — or 0.1 per cent of global production — has been cut as oil trades below US$35 a barrel, even as 3.4 million barrels of production is unprofitable at that price.
About 30,000 barrels of that production cut has come from older conventional and heavy oil wells in Canada, with the rest from ultra low-output wells in the United States and some aging offshore wells in the United Kingdom’s North Sea.
But while Canada represents about a third of the reduced output, it accounts for more than half of unprofitable global production due to high costs and lack of access to markets.
Wood Mackenzie estimates that 2.2 million barrels a day of Canadian production is operating at a negative cash cost when oil is at US$35 a barrel, meaning more than half of Canada’s total output of about 3.9 million barrels a day is currently unprofitable.
Much of that unprofitable production is coming from the oilsands, but Wood Mackenzie says that because of the costs and complexity of shutting down bitumen production, operators are reluctant to reduce output.
“Given the cost of restarting production, many producers will continue to take the loss in the hope of a rebound in prices,” said Robert Plummer, vice-President of investment research at Wood Mackenzie.
Other producers who have entered negative cash cost territory include Venezuela with about 230,000 barrels a day of unprofitable production, the U.K. with about 220,000 barrels, and the U.S. with some 190,000 barrels.
The tight oil production from the U.S. that helped spur the glut of global production only starts to become cash negative below US$30 a barrel, Wood Mackenzie said.
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