US congress panel sees Canadian oil sands countering OPEC's power

London (Platts)--27Jun2006

Canada's vast oil sands reserves are set to boost North American energy
security as rising production counters the power of the OPEC oil cartel in
world markets, a congressional panel said in a report released this week.

"With reserves that rival Saudi Arabia's in size, Canadian oil sands
development has the potential to moderate future oil prices in the world
market," said the report, released Monday by the Joint Economic Committee.

"For the North American crude oil market, the large indigenous reserves
under development hold out the prospect of increasing energy security," the
report continued, although it noted that big increases in output would take
time because of the huge investments needed.

And, it added, "while the amounts of oil produced are not large enough to
achieve energy independence for North America, they represent a growing
counter weight to OPEC's market power and as such will gradually increase our
energy security."

As crude prices have risen, oil sands production has become increasingly
commercial.

The report said that despite declining output of conventional crude,
Canada's growing oil sands production would rank the country as the world's
fourth or fifth biggest oil producer in ten years' time with--depending on the
various forecasts--combined conventional crude and oil sands production of
somewhere between 3.9 and 4.6 million b/d. Canada is currently ranked seventh,
with 3.1 million b/d in 2005, of which oil sands production accounted for 1.1
million b/d.

Canada is the biggest foreign supplier of crude and natural gas to the
US, delivering 16% of US crude imports last year.

Increased Canadian oil output will not be enough to replace US oil
imports from other countries, the report said, noting that US net oil imports
last year totaled 10 million b/d, of which 5.25 million b/d came from OPEC and
2.2 million b/d from the Persian Gulf.

"Nevertheless, the presence of an enormous potential oil supply does
enhance North American and world energy security," the report said, adding
that the potential for still larger increases in oil sands output, even if
costs were to increase, "lessens the possibility that the market price of oil
could settle at even higher levels in the long run."

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