Capital spending in Canada’s oil and natural gas sector is forecast to decline $50 billion, or 62 per cent, since 2014, the largest two-year decline since the Canadian Association of Petroleum Producers (CAPP) and its predecessor organizations started tracking this data in 1947, according to new data compiled by CAPP.
Total capital investment in the oil and natural gas sector is forecast to decline to $31 billion in 2016, down from a record $81 billion in 2014.
As a result, the total number of wells drilled in Western Canada is forecast to decline to 3,500 wells in 2016, a 66% drop from the 10,400 wells drilled in 2014.
“Canada needs urgent action to remain an attractive market for oil and gas investment, and to be competitive relative to other oil and natural gas producing jurisdictions,” said Tim McMillan, CAPP president and chief executive.
“Times are tough today in Canada’s oil and natural gas sector, but the world will require responsibly produced energy for a long time to come,” McMillan said.
The country’s new Liberal government has unveiled tougher environmental standards for energy projects, and has taken “a different approach” than its Conservative predecessor in spurring oil and gas development, McMillan said in an interview with reporters.
“Canada has the energy the world needs, and we can and should take action now, as a country, to ensure Canada competes globally and becomes the energy supplier of choice to world markets.”
The timely expansion of Canada’s pipelines network to deliver to more markets at home and abroad, along with the development of liquefied natural gas export facilities, remains a national priority.
Doing so would allow Canadians to earn full value for their resources and create economic activity that would otherwise be lost, according to CAPP.
“The United States, our only customer and No. 1 competitor, is certainly not standing still,” McMillan said. “We as a country need a common effort to have a level playing field in North America. Doing so will help ensure Canada is not at a competitive disadvantage relative to the U.S.”
More than 2,300 businesses across Canada outside of Alberta supply goods and services to the oil sands. Including indirect jobs, more than 110,000 people across Canada have lost their jobs as a result of the downturn in the oil and natural gas sector.
“The impacts of declining activity in Canada’s oil and gas industry are felt by many families across the country. Governments will see revenues from industry’s royalty and tax payments reduced further, which could impact their ability to fund public services such as universities, hospitals and roads,” McMillan said.
“Connecting our resources – by all means and in all directions – to more markets is critically important to improve the prosperity of all Canadians, even with the current declines in prices and investment,” McMillan said, noting Canadian oil production continues growing as previously approved oil sands projects come into operation.
“More market access and being able to attract the investment that creates jobs – these are the twin determinants of the long-term success of Canada’s oil and natural gas industry, and our ability to put Canadians to work.”
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