Updated June 2024
Production Forecast
Mined Bitumen
Production from existing facilities and supply from future projects are considered in Table S3.5. Production from future mining projects considers the cost of engineering, materials, and the skilled labour needed to expand existing projects and build new ones. Other factors considered include the long-term forecast of oil prices and capital investment availability.
All approved and applied-for projects have been considered based on their likelihood of meeting their on-stream date and production capacity. This involves weighing the risks for each project. Some projects considered will ultimately not be included in the ten-year forecast due to the high level of uncertainty about whether they will come on stream within the next decade.
In Situ Bitumen
Like surface mining, the supply forecast of in situ bitumen includes production from existing projects, expansions to existing projects, and new projects. All approved and applied-for projects have been considered (see Table S3.6). The forecast assumes that all existing projects will continue producing at normal production levels over the forecast period.
Projects considered for the forecast are assessed for the likelihood of meeting the on-stream date and stated production capacity. This involves weighing the risks for each project. Some projects considered will ultimately not be included in the ten-year forecast due to the high level of uncertainty about whether they will come on stream within the next decade.
In projecting primary bitumen production, the AER combines expected production from currently active wells and new wells placed on production. The number of new wells placed on production, their average initial productivity and decline rates are the main determining factors in projecting production volumes. Like the crude oil well methodology, an economic model is used to determine the number of primary wells placed on production to form the basis of the forecast.
The production forecast for future crude bitumen projects accounts for the past performance of similar schemes (including production and energy demand intensities), project modifications, the long-term forecast of crude oil and natural gas prices, light crude and bitumen price differentials, and the ability of North American markets to absorb increased volumes. Factors that may affect the pace of development, such as the availability of labour and equipment, were considered in the forecast.
Upgraded Bitumen
Table S3.7 lists all future projects considered in the forecast. The AER considers the cost of engineering, materials, and the amount of skilled labour required to expand existing projects and build new ones. Other key factors are assessed, including the long-term crude oil price forecasts, the price differential between light crude oil and bitumen, the length of the construction period of an upgrader, and the market penetration of new upgraded volumes, all of which will affect project timing.
Demand Forecast
The bitumen demand forecast largely considers upgrading and refining capacity. Alberta’s demand includes newly proposed and approved expansion projects. Marketable production exceeding Alberta’s demand is assumed to be exported to other markets. Markets traditionally served by Alberta’s bitumen are assessed for opportunities and limitations, including maintenance schedules, transportation constraints, and competing supplies of crude oil.
Supply Costs
Supply costs are the minimum constant dollar price required to recover all capital expenditures, operating costs, royalties, and taxes, as well as to earn a specified return on investment. After accounting for transportation costs and exchange rates, bitumen supply cost calculations enable projects to be compared with other crude oil benchmarks. This price can also be compared with current market prices to assess whether a project or resource is economically attractive.
Assumptions
Reference projects in our supply cost estimates include in situ steam-assisted gravity drainage (SAGD) and standalone mining with cogeneration. Although each project is unique in its location and in the quality of its reserves, our supply cost analyses rely on a range of project specifications, including capital and operating cost information gathered from applications and company plans.
SAGD capital costs cover a wide range of values—the lower range represents additional expansion phases where portions of the infrastructure are already in place, and the upper range represents capital costs for greenfield projects.
A major component of operating costs is natural gas purchased for fuel and feedstock. For 2024 and beyond, our analysis assumes a nominal discount rate of 10%.
Carbon cost assumptions for new oil sands projects are considered in the supply cost estimates. The assumptions require oil sands projects to adhere to the Technology Innovation and Emissions Reduction Regulation (TIER) to meet facility emission benchmarks. Facilities that do not directly meet their benchmark can also comply by submitting offsets, performance credits, or payment into the TIER fund. The current federal carbon pricing scheme is projected to increase from $80 per tonne of carbon dioxide equivalent (CO2e) in 2024 to $170 tonne of CO2e in 2030 to 2033.
Data
All 2023 data is as reported by industry until the end of December and does not capture any subsequent amendments. We used crude bitumen production volumes submitted in Petrinex.
