Capital spending by Canada's oil and gas industry will rise by 6 percent, or C$1.9 billion, in 2020 from the previous year, halting a six-year decline due to improving economics, the Canadian Association of Petroleum Producers (CAPP) forecast on Thursday, report agencies.
CAPP said a corporate tax cut by Alberta's provincial government last year and its easing of oil production limits will lead to higher spending. Congested pipelines created a glut of oil in storage in the Western Canadian province in recent years, depressing prices and causing its government to curtail output by the biggest producers.
Oil producers are cautiously optimistic that proposed pipeline expansions - badly needed to move Alberta oil to U.S. refineries - are advancing after years of delay, the association said. “Investors are seeing some positive activity in the industry right now," CAPP Chief Executive Tim McMillan said in a statement. "We need policies and action that keep us moving ahead.”
CAPP forecasts overall spending for 2020 to rise to C$37 billion from C$35.1 billion. Conventional oil and gas spending is expected to reach C$25.4 billion, up C$1 billion, while spending in the oil sands may climb to C$11.6 billion from C$10.7 billion, CAPP said. Spending is set to rise in the neighboring province of Saskatchewan, which recently set a 10-year goal to boost production, CAPP said.
Another industry group, the Petroleum Services Association of Canada, revised higher its 2020 forecast for wells drilled in Canada, up 7 percent to 4,800 wells, due to eased curtailments. Compared with last year, however, drilling activity is seen falling 2 percent.