Canadian Oil & Gas Group Sees 2021 Spending Boost
The Canadian Association of Petroleum Producers (Capp) said January 13 it expects to see a 14% increase in upstream capital spending this year, halting a decline that has seen investment by Canada’s oil and gas producers plunge from C$81bn (US$64bn) in 2014 to just C$24bn in 2020.
In part reflecting an increase in the number of wells that will be drilled this year to 3,300 from 3,000 in 2020, the industry group, which represents about 80% of Canada’s oil and gas production, sees spending in 2021 of $27.3bn, an increase of about $3.36bn from 2020.
“It is a positive sign to see capital investment numbers moving up from the record lows of 2020,” Capp CEO Tim McMillan said. “This can be read as the start of what we expect will be a long road to economic recovery for the natural gas and oil industry and the Canadian economy as a whole.”
The increased spending, Capp said, is primarily focused in the western producing provinces of Alberta and British Columbia (BC), while Saskatchewan will see a modest increase in investment. Spending in Atlantic Canada is expected to remain “relatively stable” compared to 2020.
Oil and natural gas spending (which includes unconventional gas) is forecast to increase to C$20bn from C$17.2bn in 2020, while spending in the oil sands will rise to C$7.3bn from C$6.7bn.
A year ago, Capp was looking at 2020 investment of C$37bn. But the emergence of the Covid-19 pandemic in March 2020, along with a crude oil price war between Russia and Saudi Arabia, shredded those forecasts and led to an “unprecedented” 31% drop in investment, wiping out more than C$12bn of planned spending.
“This encouraging news demonstrates the ongoing resilience of Canada’s energy industry and its confidence in Alberta’s investment climate,” Alberta energy minister Sonya Savage said in a statement. “Faced with the shock of the pandemic, the corresponding commodity price collapse and last spring’s temporary but debilitating price war, Canada’s oil and gas companies have once again demonstrated their adaptability, expertise and innovation to stabilise the industry.”
In 2021, Capp said, the global availability of Covid-19 vaccines should lead to higher economic activity and increased energy demand. The International Energy Agency projects the global economy will return to pre-Covid levels this year, while global energy demand is expected to reach its record pre-pandemic levels in early 2023.
“This growth offers significant opportunity for Canadian natural gas and oil producers as their access to global markets expands,” Capp said.
Upstream investments in Alberta are forecast to increase 18% this year, to C$11.8bn, while BC could see a 29% boost, to C$3.9bn from C$3bn in 2020.
“The province’s support for liquefied natural gas remains a driver for investment, with the LNG Canada project under construction – one of the largest capital projects in Canadian history,” Capp said.
Saskatchewan will see a modest 5% increase in spending, to C$2.8bn from C$2.7bn in 2020, while in Atlantic Canada – principally Newfoundland and Labrador – spending will remain flat at about C$1.5bn.