Capital spending in the oil and natural gas industry is expected to be about $2 billion higher in 2020 compared to last year. This represents a four per cent increase in capital investment in the conventional side, and an eight per cent increase in the oil sands, according to the Canadian Association of Petroleum Producers (CAPP).
Conventional oil and natural gas capital investment for 2020 is forecast at $25.4 billion, up from an estimated $24.4 billion last year. Meanwhile, capital investment in the oil sands is forecast at $11.6 billion in 2020, up from an estimated $10.7 billion in 2019. This marks the first time in five years that oil sands capital spending is expected to experience an upswing.
Overall for the oil and natural gas sector, total capital investment this year is forecast at $37 billion, up from an estimated $35.1 billion in 2019, for a combined increase of six per cent in 2020. This would halt the dramatic decline seen since 2014, when investment numbers reached $81 billion.
Adds McMillan, “We are very happy to see an increase in capital investment expected for 2020. It’s a reflection of the hard work and determination on many fronts to bring the industry into a more competitive position. That includes the corporate tax cut by the Government of Alberta, and incenting crude by rail under curtailment, which is helping to attract business and investment.”
CAPP also highlighted the fact that oil producers are cautiously optimistic that additional pipeline capacity is on the way. With the Line 3 project scheduled to come on stream in late 2020, the Trans Mountain Expansion underway, and pre-construction activities ongoing for Keystone XL, there is potential for medium and long-term production growth with access to global markets and expanded transport capacity into the United States.
“Investors are seeing some positive activity in the industry right now,” notes McMillan. “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. 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.”