Business friendly policies enacted by the Alberta and Saskatchewan governments are receiving much of the credit as the Canadian oil and gas industry forecasts a jump of about $2 billion in capital spending this year.
After spending declines in four of the past five years, about six per cent more will be invested in the Canadian upstream sector this year compared with 2019, the Canadian Association of Petroleum Producers said Thursday.
That will take the total to about $37 billion, which is less than half as much as in 2014 when investment levels reached $81 billion.
The association said the “main driver” for the spending jump is an improved economic environment due to provincial government policies, along with growing optimism that new export pipeline capacity will be built.
“The increase in capital investment is a very positive sign for the upstream sector, and there is a lot more work to be done to keep this momentum,” CAPP CEO Tim McMillan said.
“That includes the continued steps being taken, including the government of Alberta’s red tape reduction panel, as well as necessary work that must happen in terms of municipal tax reform in both Alberta and Saskatchewan to foster fairness and competitiveness.”
CAPP said Alberta’s moves to slash corporate tax rates and ease oil production curtailment levels, as well as Saskatchewan’s regulatory efficiency and recent target to boost oil output by 25 per cent by 2030, are both helping investor confidence.
The industry has been calling for changes to the way municipalities calculate property taxes, charging valuations are too high given recent hard times.
The Rural Municipalities of Alberta reported about $173 million in property taxes from oil and gas companies is owed to 69 municipalities across the province, up 114 per cent from last year.
Non-oilsands oil and natural gas capital investment for 2020 is forecast at $25.4 billion, CAPP said, up four per cent from an estimated $24.4 billion last year.
Oilsands spending is forecast at $11.6 billion in 2020, up eight per cent from an estimated $10.7 billion in 2019 and the first rise in five years.
“Last year was a pretty tough year so I think eight per cent is not surprising,” Alex Pourbaix, CEO of oilsands producer Cenovus Energy Inc., said in an interview.
In another encouraging sign for the industry, the Petroleum Services Association of Canada said Thursday it was revising its drilling forecast higher for 2020.
It now estimates 4,800 wells will be drilled across Canada, an increase of 300 wells or seven per cent from PSAC’s October estimate.
“With three major oilsands companies planning higher activity this year with some curtailment quotas relaxed, we have increased our forecast by 300 wells,” PSAC CEO Gary Mar said.
“Overall, however, although many companies experienced a stronger start to 2020, we believe this is primarily due to work deferred from 2019 Q4 that will not translate into increased activity for the rest of the year.”
CAPP estimates the extra $2 billion in capital spending will create or sustain about 11,800 direct and indirect jobs across Canada, with 8,100 in Alberta.
The Canadian Press