Canada’s capital spending on its oil and gas industry fell by more than half in the second quarter as the pandemic-inspired low prices continue to burden oil and gas producers with impossible breakevens.
Canada’s capital spending fell 54% in Q2, to $3.88 billion, according to Statistics Canada. This is down from $8.46 billion in Q1 2020 and $8.59 billion in Q4 2019.
The Canadian Association of Petroleum Producers estimated a couple of months ago that the full-year spend for its oil and gas production sector would be just above $23 billion—down from $37 billion for the year that it predicted in January, prior to the Covid-19 pandemic.
Earlier this month, ATB Financial estimated that the heart of Canada’s oil industry, Alberta, would spend just $16.6 billion this year on oil and gas extraction—a drop of $7 billion from 2019. If realized, it will be the lowest spend since 2006, and 58% lower than Alberta’s ten-year average spend.
IHS Markit called this $7 billion drop “extraordinarily” large.
Prior to the pandemic, Alberta’s 2020 oil and gas capital spending was expected to be similar to 2019 levels.
Over half of what Alberta spends each year is on its oil and gas industry.
While recovery is expected at some point, it is no secret that even after the pandemic is behind it, Canada’s oil industry will continue to struggle, with pipeline projects stirring up trouble between provinces, and climate issues gaining traction.
For now, those pipeline issues have been put on the backburner while Canada’s oil production has fallen below its restrictive pipeline capacity that carries its oil to market. However, those issues will once again rear their ugly heads as the price of oil—and subsequently, the production of oil—rises.
