Canadian oil & gas lobby projects 22% spending boost
The Canadian Association of Petroleum Producers (CAPP), which represents about 80% of the country’s oil and gas production, is forecasting a 22% increase in sector investment this year, it said January 20.
It says capital spending in the sector could increase to C$32.8bn (US$26.3bn) this year from an estimated C$26.9bn in 2021 – the second consecutive year of spending increases to take advantage of stronger commodity prices.
“The growth in upstream investment will support jobs across the country and provide a positive boost to Canada’s economic recovery,” CAPP CEO Tim McMillan said. “Improving commodity prices and increased investment in natural gas and oil production will also deliver billions more dollars of much-needed government revenues to support Canadians as we work our way through the ongoing Covid-19 pandemic.”
Spending on conventional oil and natural gas is forecast at C$21.2bn this year, up from C$18.1bn last year, while investment in the oil sands is projected to rise to C$11.6bn from C$8.7bn.
Alberta is expected to lead all provinces, with upstream investment projected to climb to C$24.5bn this year from C$19.7bn in 2021. Growth is seen in both the conventional and oil sands sectors, CAPP said.
In BC – a natural gas jurisdiction – growing global demand for natural gas is translating into multi-year highs for the commodity and spurring producers there to contemplate increased investments. An ongoing royalty review and a moratorium on development permits slowed investments in 2021, but spending this year is expected to increase to C$4.1bn from C$3.4bn.
Saskatchewan is poised to see a 16% resurgence in spending, to C$2.7bn from C$2.3bn, while spending in Canada’s offshore sector is seen relatively flat this year at C$1.6bn – despite expectations for a 7% increase in sector spending globally, to C$195bn, and investments in the Gulf of Mexico expected to increase by 21%, to C$13.1bn, CAPP noted.
“Every barrel of oil and molecule of natural gas not produced in Canada will be produced by other countries that likely do not match our high environmental and social standards,” McMillan said. “As one of the most innovative and responsible energy producers in the world, Canada needs to take a larger role in meeting the growing global demand for energy.”
Although the increased spending forecast is good news for Canada’s struggling economy, he added, Canada is still losing market share to other producers around the world. In 2014, Canada attracted C$81bn of oil and gas investment, or about 10% of the global total; in 2022, based on a Wood Mackenzie forecast of C$525bn in global spending, Canada will have fallen to just a 6% market share – a potential investment loss of C$21bn.
“Rapid demand growth for oil and natural gas globally and strengthening commodity prices mean there is an opportunity for Canada’s industry for decades to come,” McMillan said. “To ensure a true recovery takes hold in Canada, government at all levels, along with the industry, must work together to create an environment where the natural gas and oil industry can thrive and attract investment back to Canada.”