Page 4 - NorthAmOil Week 05

NorthAmOil COMMENTARY NorthAmOil
Oil sands investment forecast to rise for first time since 2014
A Canadian industry group has projected that investment into Alberta’s oil sands will rise this year, for the rst time since oil prices collapsed in 2014
ALBERTA
WHAT:
Capital spending on Canada’s oil sands is anticipated to rise for the rst time since 2014.
WHY:
Initiatives by the Alberta government are expected to make investment in the province’s oil sands more attractive.
WHAT NEXT:
Producers are increasingly hopeful that new pipeline capacity out of the oil sands will start up soon.
CANADA’Sbeleagueredoilsandsindustrymay have some rare good news to look forward to, if a new forecast turns out to be accurate. e Canadian Association of Petroleum Producers (CAPP), an industry group, announced on Janu- ary 30 that it expected capital spending in the oil sands to rise this year for the rst time since the oil price downturn started in 2014. e increase is projected to come as part of a broader rise in 2020 spending across the Canadian oil and gas industry as a whole, with capital expenditure on conventional oil and gas also forecast to go up.
e CAPP anticipates oil sands capex reach- ing CAD11.6bn ($8.7bn) in 2020, up from an estimated CAD10.7bn ($8.1bn) in 2019. is 8.4% increase would mark the rst time in ve years that oil sands investments rose. However, it would still fall far short of the peak annual oil sands capex levels of CAD33.9bn ($25.5bn), recorded in 2014.
Policy push
Crude prices remain depressed, with Western Canadian Select (WCS) hit particularly hard by pipeline bottlenecks in the country. e expec- tation that investment in the oil sands – and other Canadian oil and gas developments – will rise may thus come as a surprise. However, it has been attributed to other factors, among which policies introduced by the government of
Albertaareparticularlynotable.
Alberta is under considerable pressure to
support its oil industry, but the policies being brought in to this end have not always been universally welcomed. is is best illustrated by mandatory caps on provincial crude production, introduced by the previous New Democratic Party (NDP) government, led by Rachel Notley. While the output cap helped to boost regional oil prices last year, it nonetheless proved deeply unpopular with some parts of the oil indus- try, and contributed to the NDP’s defeat in the provincial election in April 2019. e United Conservative Party (UCP), which took over in Alberta, has been gradually easing the limits imposed on provincial producers, but has none- theless extended the curtailment until the end of 2020 as delays have continued to plague new pipelines planned for the region.
Even the gradual easing of output restrictions appears set to help raise investment, though. e CAPP also noted that a provincial move to allow producers to exceed the production limits if they ship their output by rail was expected to help encourage investment.
Producers have been allowed to exploit the loophole, which Alberta Minister of Energy Sonya Savage has described as a “short-term approach”, from December.
e rail system can handle 500,000-600,000
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w w w . N E W S B A S E . c o m Week 05 05•February•2020