Canada’s oil and gas industry overcame years of underinvestment, weak commodity prices, and a pandemic-led demand shock as it set a record for bitumen production last October, according to a federal regulator.
Bitumen is a heavy, viscous oil with a natural consistency similar to peanut butter that must be processed extensively to convert it into crude oil, before it can be used by refineries to produce gasoline and other petroleum products.
In a report on Wednesday, the Canadian Energy Regulator (CER) said bitumen production from oil sands mining and in-situ operations hit a record high of 3.5 million barrels per day (MMb/d) in October 2021.
“This record production was achieved despite lower capital investments since 2014, low oil prices, and crude oil production limits set by the Alberta government in 2019,” CER wrote in its report. “In addition, the COVID-19 pandemic reduced oil demand around the world starting in early 2020.”
CER said the high was due to a variety of factors, including increased production at Imperial Oil’s (IMO.TO)(IMO) Kearl and Suncor’s (SU.TO)(SU) Fort Hills mines, and higher production at Cenovus’s (CVE.TO)(CVE) Christina Lake and Foster Creek projects.
The regulator said production growth in 2021 could be the result of initial investments made as far back as 2017, with projects taking between two to four years to build and begin producing.
Since the record-setting month in October, Ottawa has committed to pump more oil and gas to alleviate a worsening global energy crisis. North American benchmark West Texas Intermediate (CL=F) crude has surged more than 60 per cent year-to-date, trading at US$122 per barrel on Wednesday.
According to Statistics Canada data released on Tuesday, production of crude oil and equivalent products increased 2.3 percent to 24.2 million cubic meters in March. The agency said the second-consecutive monthly gain on an annualized basis was driven by a 1.8 per cent increase in oil sands extraction, and a 3.6 per cent rise in synthetic crude production.
According to the StatCan’s Raw Material Price Index, the price for crude oil and bitumen jumped 21 per cent in March over the prior month, and rose 79.8 per cent compared with March 2021, as the conflict in Ukraine and sanctions imposed on Russia rattled energy markets.
StatCan also noted that production of marketable natural gas hit its highest level since January 2016 in March, rising 7.2 per cent year-over-year to 639.0 million gigajoules.
The agency said Canadians were paying 27.9 per cent more for natural gas in March, compared with the same month in 2021. Prices jumped 3.4 per cent compared with February 2022, according to its data.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.