The Canadian Association of Petroleum Producers says capital spending in the oil sands is set to decline for a fifth consecutive year this year as Canada’s oil sector continues to miss a significant opportunity to benefit from the global commodity price and finally receive fair market value for Canadian resources.
In its 2019 Crude Oil Forecast, Markets and Transportation report, which was released on Thursday during the Global Petroleum Show in Calgary, highlighted what CAPP called a “constrained outlook” for Canadian oil production over the forecast period from 2019 to 2035.
It said that although the country’s overall crude oil production is expected to grow over the coming years, that growth forecast is significantly reduced from previous expectations. Pipeline constraints, a lack of market diversity and inefficient regulations are largely responsible for holding back Canada’s oil sector, it added.
“We need pipeline capacity and more efficient regulatory policy to help bring investment back to the oil sector and drive growth. CAPP has been vocal in its concerns about the challenges facing Canada’s energy industry and our forecast demonstrates the impact these challenges are having on the overall economy,” said Tim McMillan, CAPP president and CEO.
“Canadians are being left on the sidelines while global demand for oil and natural gas is rapidly growing. We are positioned to be a leading supplier of the most responsibly produced oil and natural gas on the planet but our lack of pipelines and inefficient regulatory reality means that other suppliers, with lesser environmental and social standards, are taking our market share.”
In its report, CAPP said Canadian crude oil production will increase by 1.27 million barrels per day (b/d) to 5.86 million b/d by 2035, which is a 1.44 per cent annual increase. But that growth rate is less than half of that projected in CAPP’s 2014 outlook.
“This year, capital spending in the oil sands is set to decline for a fifth consecutive year to roughly $12 billion, approximately one-third of the investment seen in 2014. Conventional oil producers are expected to drill fewer wells in 2019 compared to either of the two previous years, and activity is not likely to improve without better market access via pipelines,” said CAPP.
“Overall, capital investment across Canada’s oil and natural gas industry is forecast to fall to $37 billion in 2019 compared to $81 billion in 2014. With global demand for crude oil expected to grow through to 2040, Canada has the opportunity to reclaim over $40 billion of investment if it addresses the key challenges surrounding access to international markets and regulatory and fiscal policy both federally and provincially.
“If those challenges are not met, any meaningful increase in oil production will not be achievable, reducing potential growth in Canada’s gross domestic product, business investment, exports, and jobs.”