Natural Gas and Oil Industry Investing in Canada's Economic Recovery: CAPP forecasts an increase of more than $3 billion in planned upstream spending for 2021
CALGARY, AB, Jan. 13, 2021 /CNW/ - The Canadian Association of Petroleum Producers (CAPP) is forecasting a 14 per cent increase in upstream natural gas and oil investment in 2021. 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.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.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.One year ago, CAPP's initial forecast for 2020 expected investment to reach $37 billion; however, a crude oil price war between Russia and Saudi Arabia in March of 2020 and the global economic impacts of the COVID-19 pandemic contributed to an unprecedented 31 per cent drop in investment, wiping out more than $12 billion of planned spending.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.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.
- In 2020, the Government of Alberta announced municipal tax relief for new wells drilled, eliminated the municipal Well Drilling Equipment Tax (WDET), and accelerated its corporate income tax reduction plan.
- The province released its first annual red tape reduction report, continuing its commitment on red tape reduction and helping to strengthen investment competitiveness by lowering the bureaucratic burden and reducing costs on industry.
- Alberta invested $1.5 billion in the Keystone XL pipeline, which lead to the starting of construction on the project. Keystone XL, along with the Trans Mountain expansion and Enbridge Line 3 pipeline projects also under construction, offer expanded market access for Canadian oil to global markets.