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NorthAmOil INVESTMENT NorthAmOil

Dramatic fall reported in Canadian

oil and gas spending

CANADA STATISTICS Canada announced last week that for the industry. The Canadian Association of
capital expenditure by the country’s oil and gas Petroleum Producers (CAPP), for example,
industry had fallen 54% sequentially in the sec- has revised its full-year oil and gas produc-
ond quarter of 2020. The agency’s latest update tion spending expectations down to just over
showed that second-quarter spending fell to CAD23bn ($17.6bn), from a previous projec-
CAD3.89bn ($2.97bn). The decline was attrib- tion of CAD37bn ($28.2bn). Indeed, prior to the
uted to the coronavirus (COVID-19) pandemic worldwide spread of COVID-19, the CAPP had
and the deterioration in oil prices. anticipated oil sands spending to rise this year
Statistics Canada’s data show that oil and gas compared with 2019 for the first time in five
capex had stayed relatively steady over the prior years.
four quarters. In the second quarter of 2019, More recently, ATB Financial said in mid-Au-
capex came in at CAD8.59bn ($6.55bn), dipping gust that it expected Canadian oil and gas pro-
slightly to CAD8.25bn ($6.29bn) in the fourth duction capex to fall by CAD7bn ($5.3bn) this The fact that
quarter of last year before rebounding some- year to CAD16.6bn ($12.7bn). The provincial
what to CAD8.47 ($6.46bn) in the first quarter Crown corporation said this would be the low- spending fell
of 2020. The fact that spending fell by more than est spending level since at least 2006, and around
half in the most recent quarter illustrates the 58% lower than the 10-year average. by more than
dramatic impact the downturn has had on Can- “Oil and gas capital spending was originally
ada. And that decline came after the country’s oil expected to be roughly the same as last year – half in the most
industry had already been struggling for some which was already 39% below the 10-year aver- recent quarter
time with takeaway capacity constraints, among age – but the estimate has been lowered in light
other issues. of the oil price crash and the global pandemic,” illustrates the
Indeed, the data show the overall decline ATB said.
trend seen in the Canadian oil and gas industry’s Consultancy IHS Markit has described this dramatic impact
capex since its peak of CAD20.87bn ($15.92bn) projected drop in spending as “extraordinarily”
in the fourth quarter of 2014, at the start of the large. the downturn has
last crude price downturn. By the fourth quarter Oil prices have stabilised in recent weeks, had on Canada.
of 2015, spending had slumped by almost half, allowing some Canadian producers to
to CAD10.68bn ($8.15bn), and it then fluctu- restore the output they curtailed during the
ated at close to that level until late 2017, when it worst of the downturn. However, oil prices
resumed its decline. remain vulnerable to new swings, and con-
Various forecasts have also emerged of siderable uncertainty also remains over what
what Canada’s oil and gas industry is expected will happen with COVID-19 and how it will
to spend over the course of 2020. These fore- affect energy demand and operations in the
casts also paint a bleak picture of the outlook coming months.™

P12 www. NEWSBASE .com Week 35 03•September•2020