American Oil and Gas Reporter - August 2015 - 123

entered 2015 averaging more than 300,000
bbl/d.
Still, since this time last year, Haley
points out that Colorado's rig count has
dropped about 50 percent.
However, he remarks that the market
shift has not had a uniform impact on
Colorado's producers. "The situation
seems to vary by basin, company, and
initial investment," he muses. "You would
think the price situation might affect all
companies the same, but it really hasn't.
Certainly, though, for some companies,
it is a difficult time."
COGA member companies have experienced some layoffs, Haley continues,
but he affirms that Colorado operators
are becoming more efficient.
Many companies still see the Denver-Julesburg Basin as a great opportu-

nity, he continues, and there have been
several mergers and acquisitions as a
result of that. "The basin has been the
epicenter of our activity for the past
few years," Haley comments. "Right
now, you can't paint its condition with
a broad stroke. Every company has been
affected differently, depending on where
they are physically and financially, and
what type of and how many projects
they are working."
Harrison comments that many companies are waiting cautiously to see what
the market does, and/or are consolidating
and centralizing their operations. "Everyone is trying to be smart about budgeting,"
he adds. "The companies still in the basin
are becoming more efficient, and our
production numbers are still going strong."
❒

Canadian Oil Sands Production
Incremental Growth Is Slowing
WASHINGTON-Canadian oil sands
production is expected to increase by
800,000 barrels a day through 2020,
nearly 300,000 bbl/d less than earlier
forecasts, as lower oil prices slow development of some projects, IHS reports.
The analysis points out the production
growth will keep Canada among the
largest sources of growth in global oil
supply throughout that period. It predicts
the country will remain the third-largest
source of oil supply growth, a position it
has held since 2005.
The updated IHS production forecast
is 280,000 bbl/d less than the outlook
projected before the collapse in crude oil
prices, which the analysis says now stands
at roughly half the level of a year ago.
However, despite the lower crude prices,
IHS predicts oil sands production will
continue to register strong growth over
the next five years for several reasons:
* Projects that already are running
are expected to continue to operate. IHS
estimates that, on an operating (or cash)
cost basis, oil sands mining and steamassisted gravity drainage in situ facilities
would have required, on average, a West
Texas Intermediate break-even price of
$42 a barrel and $30 a barrel, respectively.
* A sizeable number of projects already under construction, where significant
capital already has been spent, will continue through to completion. Nearly 1.0
million barrels a day of oil sands production capacity existed in various stages

of completion at the end of the first
quarter of 2015.
IHS points out costs are falling in
2015 compared with 2014 because of
the slowdown in oil investment, which it
says will lower the break-even oil price
threshold for investments in new production projects.
"There is plenty of momentum-
through projects already under construction-to support oil sands production
growth through 2020 even in this new
lower price environment," says Kevin
Birn, director for IHS Energy. "Beyond
2020, we expect oil sands growth will
continue, but the trajectory of growth
depends on projects that have yet to come
forward."
Among the factors Birn says could
influence the timing and nature of fresh
investments in oil sands projects are the
pace of the recovery in global oil prices,
the impact of lower prices on the cost
structure of competitive sources of supply,
and the ability of governments and industry
to maintain the relative competitive position of the oil sands.
Competitive pressures such as project
costs, timing of nonrail transportation to
new markets, and shifting fiscal terms in
the Canadian government in the form of
higher corporate taxes, carbon prices and
potential increases in royalties will help
shape the longer-term growth of Canadian
oil sands, IHS forecasts.
IHS says the analysis is available at
its unconventional energy blog.
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AUGUST 2015 123
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