In its annual energy outlook issued in May 2020, the Alberta Energy Regulator (AER) reported capital spending in the province’s oil, natural gas and oil sands fell by a total of 31 per cent in 2019 to $18.9 billion, down from $27.5 billion in 2018 – although global capital spending in the same period was up. The AER foresees further capital spending reductions in Alberta in 2020, for overall capital spending of between $14.1 billion and $16.4 billion. According to the AER, the decline in 2019 was due to uncertainties around energy policy, low energy prices, and market access constraints.
In the oil sands industry, capital expenditures declined to an estimated $9.9 billion in 2019 from $11.7 billion in 2018. This is a low level of spending not seen since 2005, as operators continued to defer large projects. The combined capital expenditures in Alberta for crude oil and natural gas fell to an estimated $9 billion in 2019, down 43 per cent from $15.8 billion the previous year.
In April 2020, the Canadian Association of Petroleum Producers (CAPP) noted a similar decrease in capital spending across Canada’s entire upstream oil and natural gas industry. CAPP said more than $7 billion in capital investment had been cut from the sector nationwide. Earlier in 2020, CAPP had expressed cautious optimism that capital spending would increase by about six per cent overall this year, but a global glut of oil and the effects of COVID-19 lockdowns and restrictions worldwide have hurt Canada’s oil and natural gas sector, leading to job losses and decreased capital spending across the industry. CAPP is looking for government to provide visible support for investment in the industry, which would in turn allow the industry to help drive Canada’s economic recovery.
Natural gas and oil are Canada’s largest export commodities. Despite capital spending declines across the industry, in 2019 the extraction of oil and natural gas directly contributed about $109 billion to Canada’s real GDP, and that figure translates to more than $114 billion if drilling and other support activities required for upstream production are included. Also important is the oil and natural gas sector’s capacity to generate government revenues that support education, healthcare, and social programs. Based on a three-year average, the industry contributes an average of $8 billion annually to governments across Canada.