Things can only get better for Canada
For Canada's oil industry, 2017 will surely be an improvement on last year's annus horribilis
First came the sub-$30 oil prices. Then, in May, it was the turn of the fires. The inferno that engulfed Fort McMurray in May shut in 1.3m barrels a day of production for almost three months. The combination means Canada's total average oil output in 2016 will post a 1% decline, not rise by 1.5%, as the country's regulator, the National Energy Board (NEB), had forecast.
The industry suffered another hit in June, when Canada's courts overturned the NEB's approval for the 0.55m-b/d Northern Gateway pipeline to British Columbia's west coast. The ruling said the federal and provincial governments had failed to consult aboriginal groups. Prime minister Justin Trudeau, who opposes more oil-tanker traffic of the coastline, has said his government won't appeal the decision.
All told, it was a bad year for the oil sands and Canadian energy, and 2017 can only bring an improvement. Market access - a thorny problem for years - will remain a theme in 2017. Producers will keep pressing for infrastructure to carry their oil to sea break their reliance on America's saturated market. Nearly 400,000 b/d of fresh oil sands production is supposed to come on stream in the next 18 months, so new pipes would be welcome.
The tone of this debate in 2017 will be set before the year begins, in December 2016, when Trudeau makes a decision on the controversial KinderMorgan TransMountain Expansion. The NEB has already approved that one too. The C$6.8bn ($5.2bn) project would triple the capacity of an existing line from Edmonton to Vancouver, to 0.99m b/d. Extra supplies would be gobbled up locally - but the real targets are new markets in Asia. Supporters of the pipeline project received some encouragement in September, when Trudeau approved Petronas's PacificNorthwest liquefied natural gas project against the wishes of native and environmental groups.
That green light might also bode well for another controversial pipeline project, Energy East, which would move 1.1m b/d from Alberta to New Brunswick, in Canada's east. Public hearings will drag on into 2017. It promises be the most exhaustive and scrutinised consultation in Canadian history.
Trudeau thinks he can take the politics out of the regulatory process while adhering to its basic principles of balancing environmental concerns with economic development. He's backed Energy East in the past, partly because it would make Canada effectively self-sufficient in its oil supply by ending the east's need to buy oil from Africa and the Middle East. Producers hope the project would also allow for exports to India, which is keen, and Texas - the original destination of the rejected Keystone XL pipeline.
If 2017 brings approval for Energy East, the timing would be good. Later next year, several major oil expansions should lift Canadian oil output by more than 10% by early 2018.
Suncor's 200,000-b/d Fort Hills mine, in the oil sands, should be completed late in 2017. The project has been under construction since 2014. Canadian Natural Resources is already adding another 45,000 b/d at its Horizon mine and another 80,000 b/d should come next year.
On paper, at least, producers are planning to add even more supply in 2018. Alberta's Energy Regulator has approved nearly 300,000 b/d of proposed capacity that developers are yet to sanction. In August, Teck Resources submitted an application for its 200,000-b/d Frontier mine, which will go before the regulator in 2017.
Imperial Oil, ExxonMobil's Canadian subsidiary, has approvals for another 125,000 b/d at its Kearl mine, although that expansion has been put on hold until prices improve. Likewise, Syncrude Canada - owned by Suncor, Imperial and others -has permission for another 100,000 b/d of capacity by the end of the decade.
All told, these projects could increase output by nearly 1m b/d by 2025, bringing Canadian production to 5m b/d. The oil price and lack of pipeline capacity are obstacles. But, after a bleak 2016, Alberta's oil patch thinks the horizon might be brightening.
Federal and provincial climate-change policies could still throw a spanner in the works. Alberta has introduced caps on emissions that will effectively limit production growth to 1m b/d. The federal government, has said it will introduce a carbon tax of at least C$50 per tonne by 2020.
Without a step change in the way the oil industry deals with the emissions question, either production or emissions targets will be missed.
This article is part of Outlook 2017, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here