Canada’s oil industry to see biggest investment drop in 70 yrs

A cup of heavy oil produced at the Statoil oil sands operation near Conklin, Alberta © Todd Korol
Despite an insignificant rise this year, investment in Canada's oil industry is expected to decline 62 percent from its 2014 peak due to falling crude prices, warns the Canadian Association of Petroleum Producers (CAPP).


Oil and gas spending was expected to drop to $31 billion in 2016 from a record of $81 billion in 2014, according to CAPP, with the number of wells drilled falling to 3,500 this year from 10,400 in 2014, a 66 percent decline.

The country produced 4.5 million barrels a day last year. The output might rise slightly to 4.6 barrels this year and 4.8 in 2017 after major drilling projects complete.

However, the megaprojects are history, according to several executives at the top oil sands companies such as Suncor Energy, Cenovus Energy and Meg Energy. The oil sands may see investment decline to nearly $17 billion this year.

“The years of large, multibillion dollar projects are probably gone,” said Alister Cowan, CFO of Suncor Energy to Bloomberg, adding that the company would pursue smaller projects.

The firms will purportedly focus on cutting costs. To reduce expenses Suncor is looking at using radio waves, Cenovus and Meg are exploring the use of solvents to replace the use of steam.

The depressed crude market has pushed the oil majors to sell assets in search of cash. But the commodity price rout makes it difficult for firms to find buyers for their assets.

“Since mid-2014 as oil prices came down, it has been difficult to align buyers and sellers,” said David Baboneau, managing director at Scotia Waterous as cited by the Financial Post.

Oil investments amounted as much as 56 percent of total investments in Canada in 2014. The price crash has slashed Canadian income by about $1,800 per head. Nearly 70,000 jobs have been cut in the three main energy producing provinces of Alberta, Saskatchewan, and Newfoundland and Labrador, pushing the jobless rate up by two-three percent.