US needs oil sands as surge from shale bonanza seen overdone

NEW YORK: The US will continue to need crude from Canada's oil sands because rising production from its shale formations is too expensive to maintain.

Increased crude output from US shale isn't "sustainable production", Mike Tims, chairman of Canadian investment bank Peters & Co, said on Tuesday at a Bloomberg energy forum in Calgary. Producers need to invest too much to sustain production from wells in the Bakken and Permian basins, which falls as much as 70% in the first year, Tims said.

"The optimism about additions to the US oil production needs to be tempered a little bit," Tims said.

Oil-sands capital spending fell 10% last year to C$20.4 billion ($20 billion), as some Canadian producers cut budgets amid competition from lower-cost oil supplies in US shale basins, Alberta energy regulators said in a report last month. Production from the Bakken Shale in North Dakota has more than doubled from 2011 through April to 727,150 barrels a day, according to the North Dakota Industrial Commission.

The US, the world's largest economy, will probably never be able to meet its own supply needs, said Chris Seasons, president of Devon Energy Corp. (DVN)'s Canadian division. Devon produced 8.5 million barrels of crude from Canada in the first quarter, including from its Jackfish oil-sands project.

"They're still importing a lot of oil and my view is I don't see US oil self-sufficiency, perhaps, ever," Seasons said on the panel.

Canadian oil producers are being paid less for their crude than global prices, as proposed pipelines to the continent's coasts are delayed amid rising North American supplies. Canada's crude output will more than double to 6.7 million barrels a day by 2030, provided new export conduits are built, according to the Canadian Association of Petroleum Producers.