Upstream natural gas and oil explorers in Canada are expected to increase their capital spending over 2023, but not by much, according to a top industry group.
The Canadian Association of Petroleum Producers (CAPP) issued its latest survey of capital expenditures (capex) for the upstream sector in Canadian dollars (C$1.00/US74 cents).
Capex is forecast at $40.6 billion this year, versus actual spending of an estimated $39 billion in 2023.
“Upstream oil and natural gas producers are staying disciplined, with capital expenditures expected to remain stable in 2024,” CAPP CEO Lisa Baiton said.
“There is room for cautious optimism,” Baiton said, noting oil expansions and the ongoing construction of the Shell plc-led LNG Canada export project in British Columbia (BC). The project was around 85% complete at the end of 2023.
Canadian oil production also is “at record levels” as start up of the Trans Mountain pipeline expansion nears startup by mid-year.
Conventional oil and natural gas capex this year is forecast at $27.3 billion, while oilsands investments are seen reaching about $13.3 billion.
Alberta Still Boss
By region, the breakdown, unsurprisingly, shows capex sharply weighted to Alberta. BC trails in second place.
Alberta, Western Canada’s longtime oil and gas leader, should “maintain a steady investment level” at about $29 billion, with oilsands capex pegged at around $13.3 billion. BC upstream spending is projected to reach $5 billion, slightly above last year, driven mostly by development to supply LNG Canada, which is close to completion.
In Saskatchewan, capex is forecast to climb slightly to $3.3 billion from $3 billion. About $500 million would be allocated to thermal in-situ projects related to oilsands.
Meanwhile, offshore Newfoundland and Labrador on the east coast, capex should climb to around $2 billion this year from last year’s $1.6 billion.
“Although these investment numbers are lower than in the rest of Canada, capital investment is increasing in Newfoundland and Labrador after several years of little growth,” researchers said. “There remains significant potential to grow and increase exports in the future.”
Last year, state-owned QatarEnergy staked out Eastern Canada to build exploration prospects after buying interest in ExxonMobil’s offshore acreage.
Although overall capex is rising this year, Baiton stressed that underlying uncertainty is clouding the forecast.
“Despite these positive trends, there remains a sense of caution largely due to the ongoing uncertainty surrounding proposed emissions policy in Canada, which continues to be a significant factor in investment decisions,” she said.
The federal government in late 2023 unveiled draft regulations to curb methane pollution from the oil and natural gas sector, coinciding with the finalization of similar rules by the U.S. Environmental Protection Agency. Canada’s proposed regulations would impose more oversight of methane measuring and reporting.
‘Backbone’ Of Canadian Economy
In recent years, the Canadian energy industry’s “disciplined business approach and modest production growth” have yielded solid returns for the economy, according to CAPP. The gross domestic product returns were estimated at $111 billion, with another $45 billion in revenue for municipal, provincial and federal governments.
“Energy production and export is the backbone of the Canadian economy,” Baiton said. “Hundreds of thousands of Canadians directly and indirectly rely on the industry for work, enabling thousands of families and businesses, including hundreds that are Indigenous-owned, to improve their lives and prosperity.”
The energy industry also is “among the largest investors in emissions reduction technologies,” with projects likely to accelerate this year.
Emissions from oil and natural gas production peaked in 2015. From 2012 to 2021, the conventional upstream sector lowered carbon dioxide equivalent emissions by 24% while growing production by 21%. The conventional upstream sector has also reduced methane emissions and is on track to exceed the current federal government target of a 40 to 45 percent reduction by 2025. In addition, with anticipated co-funding from governments, the country’s six largest oil sands companies expect to invest $24 billion in emissions reduction projects by 2030 and are targeting net-zero emissions from operations by 2050.
Canada’s oil and gas sector spends more than any other industry in the country on environmental protection, researchers noted. The sector spent an estimated $9.4 billion cumulatively from 2018 to 2020, accounting for one-third of total environmental protection expenditures by the nation’s businesses.
