The latest reports show that Canada’s capital spending on its oil and gas sector fell by more than half in Q2 2020 as the health crisis pushed prices significantly low. These low prices continue to burden the oil and gas producers with many nearly impossible breakevens.
Based on Statistics Canada, the country’s capital spending plunged 54% in Q2 to settle at $3.88 billion. This amount has dropped from $8.46 billion in Q1 2020 and $8.59 billion in Q4 2019.
Several months ago, the Canadian Association of Petroleum Producers estimated that the full-year spend for its oil and gas production industry; would reach just over $23 billion. That would be a drop from $37 billion for the year and it made that prediction in January before the COVID-19 pandemic hit economies around the world hard.
Earlier this August, ATB Financial said that the core of Canada’s oil sector, Alberta; would spend just $16.6 billion in 2020 on oil and gas extraction. That represents a drop of $7 billion from 2019. If it happens, it will become the lowest spend since 2006, and 58% lower than Alberta’s ten-year average spend.
IHS Markit termed this $7 billion drop “extraordinarily” large. Before the health crisis, Alberta’s 2020 oil and gas capital spending was anticipated to be at the same levels as 2019. More than 50% of what Alberta spends every year is on its oil and gas industry.
The Future Of Oil And Gas In Canada
While recovery will come at some point, it is clear that even after the pandemic subsides, Canada’s oil industry will continue to struggle. Pipeline projects are stirring up trouble between provinces and climate issues are gaining traction.
Today, the pipeline challenges have been shelved with Canada’s oil production dropping way below its restrictive pipeline capacity that carries its oil to the market. Nonetheless, the issues will erupt again in the future when the oil productions and prices rise.