The Canadian Association of Petroleum Producers (CAPP) released a report Wednesday forecasting a 14 per cent increase in upstream natural gas and oil investment in 2021.
The report said capital spending in the sector is expected to be around $3.36 billion higher this year, reaching $27.3 billion, compared to an estimated total investment of $24 billion in 2020.
“The planned investment for 2021, while increasing from the lowest levels in more than a decade, would halt the dramatic decline seen since 2014, when investment sat at $81 billion. This year’s forecast represents a stabilizing of industry investment and the beginning of a longer-term economic recovery,” said CAPP.
“The additional spending is primarily focused in Alberta and British Columbia, while numbers in Saskatchewan show modest improvement and offshore investment in Atlantic Canada is expected to remain relatively stable compared to 2020.”
Tim McMillan, president and CEO of CAPP, said it is a positive sign to see capital investment numbers rising from the record lows of 2020.
“This can be read as the start of what we expect will be a long road to economic recovery for the natural gas and oil industry and the Canadian economy as a whole,” he said. “A more than three billion dollar increase in planned upstream natural gas and oil spending signals that producers are invested in Canada’s economic recovery. With some hard work, we can build momentum from this positive news, and position Canada for success as economies around the world recover.
“As one of the largest private investors and employers in the country, the natural gas and oil industry can be a foundation for national economic recovery. The industry is committed to working with governments, at all levels, to create an environment where businesses can thrive and attract investment back to Canada. This is how we will maintain jobs and create new opportunities for Canadians.”
CAPP said conventional oil and natural gas capital investment for 2021 is forecast at $20 billion, up from an estimated $17.2 billion last year. Capital investment in the oil sands is forecast at $7.3 billion in 2021, up from an estimated $6.7 billion total in 2020.
“The expected 2021 increase of investment into the Canadian economy is partly due to the availability of COVID-19 vaccine globally, which should lead to higher economic activity and increased energy demand. The International Energy Agency (IEA) projects the global economy will return to pre-COVID levels in 2021 while global energy demand is expected to reach its record high pre-crisis levels in early 2023. This growth offers significant opportunity for Canadian natural gas and oil producers as their access to global markets expands,” said the association.
“Other contributing factors to the capital spending increases are government supports introduced in 2020, including many at the provincial level.”
In Alberta, upstream investment is expected to increase 18 per cent to total $11.8 billion in 2021 from an estimated $10 billion last year, it said.
CAPP forecasts 3,300 new wells to be drilled in Canada in 2021, up from 3,000 drilled in 2020 but significantly lower than the 4,250 drilled in 2019.