Oilpatch facing another tough year, says industry group

Better access to markets needed for oil and gas industry turnaround

Canada’s oil and gas sector is bracing for another tough year.

“This will actually be the second year in a row where we see a decline in capital investment in the sector,” the Canadian Association of Petroleum Producers’ Chris Montgomery told Lacombe city council Monday.

“So, 2019 is going to be a pretty difficult year.”

Oilsands investment has even fared worse than conventional oil and gas, with the amount of money being pumped into the heavy oil projects waning for the past six years.

In 2014, $81 billion was invested in Canada’s oil and gas sector. This year, that number is expected to be about $37 billion, said Montgomery, who is CAPP’s manager of exploration and production communications and outreach.

While the world oil and gas producers have been slowly recovering since 2016, Canada has most sharply felt the pain, largely because of the difficulties getting its products to market.

“Our oil pipelines are full and we have significant challenges in our natural gas markets as well.”

Last year, 6,300 wells were drilled in Western Canada — 3,300 in Alberta. Forecasters expect only 5,500 wells — 2,700 in Alberta — will be drilled this year.

The lack of pipeline room means when crude prices fell sharply last fall, Canadian oil and gas producers took a significant hit.

“(Low oil prices were) happening around the world, but it was exasperated here in Canada, because our pipelines were full,” he said.

“So that was creating a false over-supply in the market above and beyond what we saw in world markets here in the province.”

Then-Premier Rachel Notley’s government curtailed oil production to stabilize oil prices. If the government hadn’t moved to protect prices, royalties could have dried up for several months, he said.

“It would have had a significant impact on their budget if they allowed that situation to continue.”

Curtailment is being eased, but the answer is more pipelines, said Montgomery.

However, none of the three pipelines in the works, the Enbridge line to Chicago, Trans Mountain and Keystone XL, will be moving oil before 2020 or 2021.

“All three of those pipelines, which ought to have been in service now, they’re all going to miss 2019 certainly.”

Natural gas has also been struggling because of a decade-long price slump, further complicated by periods of volatile pricing, which makes it difficult for companies to plan ahead.

A liquefied natural gas terminal proposed for the West Coast is needed to get better access to foreign markets, said Montgomery.

CAPP, which represents around 70 companies responsible for about 80 per cent of Canada’s oil and gas production, has been busy promoting the industry and lobbying government.

The organization supported amendments — which were rejected by the Liberal government — to Bill C-69, which changes how the federal government approves major projects.

“In our view, it creates a lot of uncertainty in the process,” he said.

“This fundamentally makes it much more difficult to build big-scale projects in the country on a go-forward basis.”



pcowley@reddeeradvocate.com

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