CAPP forecasts first upswing in Canadian oil sands capital spend in 5 years
The Canadian Association of Petroleum Producers (CAPP) said upstream oil and natural gas industry spending this year in Canada is forecast to increase US$2 billion to US$37 billion compared with the estimated US$35.1 billion reached in 2019.
The 6% overall expected increase – credited to a more competitive economic environment and optimism about pipeline capacity – would halt a decline that began in 2014, when investment numbers reached US$81 billion, CAPP said.
Broken down, CAPP expects a 4% increase in capital investment in the conventional side, and an 8% increase in the oil sands, CAPP said.
Conventional oil and natural gas capital investment for is expected to reach US$25.4 billion for the year, up from an estimated US$24.4 billion in 2019.
Capital investment in the oil sands is forecast at US$11.6 billion, up from an estimated US$10.7 billion in 2019. This marks the first time in five years that oil sands capital spending is expected to see an increase.
“Investors are seeing some positive activity in the industry right now, and it’s important that all levels of government show a commitment to Canada’s energy industry and the hundreds of thousands of Canadians who work in the industry,” said Tim McMillan, CAPP president and chief executive officer.
“We need policies and action that keep us moving ahead – making us competitive, completing projects, and getting Canada’s responsibly produced energy to global markets.”
The extra US$2 billion in capital spending creates or sustains about 11,800 direct and indirect jobs across Canada (approximately 8,100 in Alberta, and 3,700 in the rest of the country).
Economic environment, capacity
A more competitive economic environment should boost spending in the industry. In 2019, the Government of Alberta introduced the job creation tax cut. As of the 1st January, the provincial government lowered Alberta’s corporate tax rate to 10% from 11%, as part of a plan to reduce the corporate income tax from 12% in 2019 to 8% in 2022.
The province also enabled producers to ship more crude by rail under curtailment and allowed new conventional oil drilling without the restriction on production.
Saskatchewan put forward its vision 2030 goal of increasing oil production by 25% to 600,000 b/d. Capital investment in the province is expected to increase 10% to US$4.4 billion this year.
British Columbia’s upstream is expected to see a modest increase in investment this year from US$3.4 billion to US$3.6 billion.
In addition to more competitive fiscal policies, oil producers are cautiously optimistic that additional pipeline capacity is on the way, CAPP said.
Enbridge Inc’s Line 3 project is scheduled to come on stream in late 2020, the Trans Mountain Expansion underway, and pre-construction activities are ongoing for Keystone XL, creating potential for medium and long-term production growth with access to global markets and expanded transport capacity into the US, CAPP said.
Source: Oil & Gas Journal