By Bruce Lantz
The Canadian Association of Petroleum Producers (CAPP) says conventional oil and natural gas investment for 2023 is expected to reach $28.5 billion while oil sands investment should reach $11.5 billion. That’s 11% higher than last year and is also above pre-pandemic levels. And that’s not counting offshore opportunities such as Newfoundland and Labrador’s Bay Du Nord, which is awaiting a final investment decision, and West White Rose, which has been reactivated.
CAPP says much of this year’s increased spending will go towards maintenance and incremental growth projects, as well as managing inflationary pressures. Spending is also expected to go toward emission reduction technologies such as advancing the development of carbon capture utilization and storage. Upstream oil and gas investment in Canada hit a low of $22 billion in 2020 as prices collapsed due to the COVID-19 pandemic.
“There are some positive signals for Canada’s offshore which the decision to restart the West White Rose offshore project which will see over $2 billion of investment through the project completion,” CAPP spokesman Jay Averill told Resource World Magazine.
“There remains significant opportunity for Canada’s offshore industry, and it will take continued collaboration between industry and governments to ensure it is best positioned to capture a larger portion of global investment.”
‘Conventional’ includes petroleum found in liquid form, flowing naturally or capable of being pumped without further processing or dilution, as well as natural gas and natural gas liquids, liquids obtained during natural gas production including ethane, propane, butanes and condensate. ‘Oil sands investment’ identifies investments in the end product derived from bitumen — crude oil located mainly in Alberta. British Columbia and Saskatchewan are both fully conventional oil and natural gas, while the offshore investment is exclusively Newfoundland and Labrador this year.
Averill said that in Alberta, investment is expected to reach $28 billion in 2023, representing about 70% of all upstream oil and natural gas investment nationally. This growth in investment is being driven both in the conventional and oil sands sectors. Saskatchewan is expected to maintain investment of about $2.7 billion, compared to about $2.6 billion in 2022.
Given that changing and growing global markets for natural gas have translated into strong prices over the past year, British Columbia producers are expected to grow investment by about $1 billion in 2023, reaching a total of about $7.2 billion. “Investment in the province is expected to be helped by the recent agreements signed by the province of British Columbia with several indigenous nations, which satisfies the courts, establishes a process to manage cumulative effects and provides for resource development authorizations and a path towards long-term development,” said Averill.
In Newfoundland and Labrador, offshore investment is expected to remain relatively flat at $1.3 billion in 2023. Last year, Canada’s offshore development showed positive signs with the federal government’s environmental assessment approval of the potential Bay du Nord project as well as the announced restart of the West White Rose project.
“Offshore investment in Canada is not growing at the same pace as the broader Canadian oil and natural gas industry or the global offshore industry,” Averill said, “although Canada’s offshore holds significant potential with some of the lowest-emission oil in the world as well as its proximity to global markets. The pending investment decision on the Bay du Nord project and upcoming exploration programs will be critical to the future of Newfoundland and Labrador’s offshore industry.”
Canada is approaching record oil production, thanks to the additional export capacity brought on by Line 3, which started in late 2021 moving record high exports to the United States. The expected completion of the TMX expansion toward the end of this year will offer additional transportation capacity of 590,000 barrels per day, which represents significant export growth.
And when the oil and gas industry is active and strong, the benefits spill over into many other sectors of society. For example, a study done for CAPP by iTotem Analytics found that from 2018-2021 the industry spent more than $4.7 billion in 140 municipalities and indigenous nations in British Columbia through the procurement of goods and services from over 2,400 B.C.-based businesses involved in engineering, construction, transportation, environmental consulting and business services. The industry spent around $540 million with some 100 indigenous-affiliated businesses and organizations — 11.5% per cent of the total supply chain spend. The spend with indigenous-affiliated businesses has been increasing, with the 2021 spend 149% higher than 2018, while the overall supply chain spend increased by $90 million, or 7.2% from 2018 to 2021. While much of the spend was in northeastern communities like Fort St. John, Dawson Creek and Pouce Coupe, significant benefits were realized across the province, with $337 million spent in Vancouver.
“A strong upstream natural gas and oil supply chain, as demonstrated by the thousands of businesses working in B.C. Between 2018 and 2021, can help us achieve our collective goal of a decarbonized future,” the study concluded. “B.C.’s natural gas and oil supply chain is comprised of businesses from indigenous communities and municipalities from across the province. Citizens who care about their community’s infrastructure and services; indigenous people with traditional knowledge and who care about reversing climate change; and residents who care deeply about advancing social progress in their schools, worksites and neighbourhoods.”
“As global demand for oil and natural gas will remain strong for decades, major energy infrastructure projects under construction, like the Trans Mountain expansion, are incredibly important to Canada reaching its potential as a provider of secure energy to our trading partners,” Averill said. “Canada has a role to play in providing safer and lower-emission resources to the world’s energy mix.”
Meeting these challenges and opportunities could result in suppliers like B.C. becoming a major export energy hub, CAPP president and CEO Lisa Baiton said in a statement. “As the iTotem study shows, the industry has been built on a foundation of respectful partnerships with indigenous nations and local municipalities, benefiting citizens right across the province.
“The emerging liquefied natural gas industry on the West coast is a generational opportunity that will help reduce global greenhouse gas emissions by providing some of the lowest-emission natural gas on the planet while being a source of prosperity for British Columbians and indigenous nations for decades to come.”