Canada, Brazil lead oil output growth in Americas

Fri Feb 8, 2008 10:09am EST
By Jeffrey Jones - Analysis
CALGARY, Alberta (Reuters) - Booming investment in Canada's oil sands and rising Brazilian crude production should more than make up for declines elsewhere in the Americas -- good news for the United States as it tries to reduce its reliance on Middle East imports, a Reuters survey showed.
The gains from northern Alberta's vast tar-like oil deposits and a string of discoveries off Brazil's coast point to shifting oil clout among Western Hemisphere countries more friendly to the United States, the world's top consumer.
"What we have been seeing is relatively flat or falling supplies from Mexico and Venezuela," said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.
"It really does open an opportunity for what I call secure, reliable supplies of oil from Canada into those markets."
Oil production in the Americas is set to rise by a net 150,000 barrels a day, or 0.7 percent, to 21.57 million bpd in 2008 -- equal to about a quarter of total estimated global output, according to Reuters calculations based on a survey of governments, investment banks and consultants.
Click here for a table showing the results of the survey:
ID:N08381815.
Canadian output is on track to rise by nearly 7 percent to around 3 million barrels a day, excluding gas liquids from processing plants and refineries, said Martin King, analyst at FirstEnergy Capital Corp.
"The gain that we're projecting there is virtually all oil sands-related," King said.
Two major oil sands projects, Nexen Inc's (NXY.TO: Quote, Profile, Research) $6.1 billion Long Lake venture and Canadian Natural Resources Ltd's (CNQ.TO: Quote, Profile, Research) $7.8 billion Horizon development, are slated to start up this year. Several smaller ones are also set to begin.
The overall value of planned oil sands projects and those under development is pegged at more than $100 billion, with nearly every oil major weathering surging costs to tap the largest oil source outside the Middle East.
BRAZIL GROWTH
Brazil could produce 2.32 million barrels a day, up 13 percent from 2007, including output of ethanol. Three new platforms are slated to start up, including Marlim Leste and Marlim Sul, each with a 180,000-barrel-a-day capacity.
State-run Petrobras also expects to begin a production test at the giant Tupi oil and gas field, where it has estimated reserves as high as 8 billion barrels.
U.S. output is expected to rise slightly as large Gulf of Mexico projects start up, making up for onshore declines.
Rising supply among Washington's allies has political benefits in the United States. But oil fetches a global price regardless of origin and OPEC still has a major influence on that price, said Judith Dwarkin, chief economist at Canadian research firm Ross Smith Energy Group.
World prices will react to supply disruptions whether Canadian or Venezuela crude is involved, Dwarkin said.
"Canada is not a price maker, nor is Brazil," she said.
Output from OPEC member Venezuela, where President Hugo Chavez spent the past year nationalizing energy assets, could dip slightly to 2.43 million barrels, the survey said, well below claims by the government.
The drop is blamed on a lack of investment and the impact of damage to facilities sustained in a crippling oil industry strike in 2002 and 2003, and comes after 2006 output was reduced by maintenance on heavy crude upgrader projects.
In Mexico, production may fall by 180,000 barrels a day to 3.32 million, due largely to declines at the giant Cantarell field, the country's largest crude source.
Those declines are big drivers behind a push by pipeline companies to build new capacity to Texas, hub of the largest U.S. refining region, from faraway Canada.
Already, producers ship supplies as far as Oklahoma, well beyond the traditional U.S. Midwest market for Canadian crude.
"The issues are Mexican decline and Venezuela as a wild card, but in the grand scheme of things, longer term, Canadian crude is going down south to the U.S. Gulf Coast," said Steve Fekete, a market analyst with consultants Purvin & Gertz.
(Additional reporting by Matthew Robinson in New York, Andrei Khalip in Rio de Janeiro and Catherine Bremer in Mexico City, editing by Matthew Lewis)