CAPP forecasts modest recovery in Canadian oil and gas upstream in 2021

Upstream oil and gas investments in B.C. are expected to increase by about $1 billion this year over last year, driven largely by the nascent LNG industry, says the Canadian Association of Petroleum Producers.

CAPP forecasts a modest recovery in capital investments in Canadian upstream oil and gas in 2021 compared to 2020, which savaged the industry with a one-two punch that resulted in a severe oil price drop.

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Investment in new or expanded oil sands projects and conventional oil and gas production had already been drying up, thanks to an oil price plunge, driven in part by an oil price war between Russia and Saudi Arabia.

Then a global pandemic drove the demand for oil down as a result of travel restrictions and lockdowns, forcing oil prices even lower. Investment in Canada’s oil and gas sectors shrunk by 31% in 2020.

The $37 billion in investment in Canadian oil and gas that CAPP had forecast for 2020 fell short by $13 billion, as oil and gas majors pulled back on spending.

CAPP now projects a modest recovery in 2021. It projects oil and gas companies will invest $27.3 billion in 2021. It projects spending in B.C. will increase by close to $1 billion in 2021 -- $3.9 billion, compared to $3 billion in 2020.

That projected spending is in upstream development, not pipelines or LNG plants.

“The province’s support for Liquefied Natural Gas remains a driver for investment with the LNG Canada project under construction -- one of the largest capital projects in Canadian history,” CAPP says in its forecast.

Most of the increased investment in 2021 will be in Alberta, B.C., and Saskatchewan, with investment in Newfoundland and Labrador’s offshore oil remaining static.

Capital investment in Alberta’s oil sands is expected to increase modestly from $6.7 billion in 2020 to $7.3 billion in 2021.

“This year’s forecast represents a stabilizing of industry investment and the beginning of a longer-term economic recovery,” CAPP says.

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