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Upstream capital investment in Canada’s oil sands is expected to grow this year from 2019 for the first increase in capital expenditures in five years, the Canadian Association of Petroleum Producers (CAPP) said on Thursday.
The association attributed its rosier expectations for this year to “a more competitive economic environment” due to some recent policies that the Alberta government has undertaken. These are Alberta’s government job creation tax cuts, the fact that energy firms now may produce more oil despite the industry-wide production cuts if those firms move the additional barrels by rail, and the permission to oil firms to drill new wells without being restricted by the current industry-wide production limits.
Upstream investment in the oil sands is expected to grow to US$8.8 billion (C$11.6 billion) this year, up from an estimated US$8.1 billion (C$10.7 billion) in 2019, the industry’s main lobby group said.
Capital spending in the oil and natural gas industry in Canada is forecast to rise by around US$1.5 billion (C$2 billion) in 2020 compared to 2019, with capital investment on conventional projects rising by 4 percent, and capital investment in the oil sands rising by 8 percent, CAAP said.
Conventional oil and natural gas capital investment is seen rising to US$19.2 billion (C$25.4 billion) this year, up from an estimated US$18.5 billion (C$24.4 billion) last year.
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Canadian energy companies, which have had a tough couple of years, continue to believe that the long-term solution to Canada’s oil industry’s woes is the construction of major new pipelines to increase market access, and potentially, to tap new export markets outside the buyer of nearly all Canadian oil exports, the United States.
“In addition to more competitive fiscal policies in key provinces, oil producers are cautiously optimistic that additional pipeline capacity is on the way. With the Line 3 project scheduled to come on stream in late 2020, the Trans Mountain Expansion underway, and pre-construction activities ongoing for Keystone XL, there is potential for medium and long-term production growth with access to global markets and expanded transport capacity into the United States,” CAPP said today.
“Investors are seeing some positive activity in the industry right now, and it’s important that all levels of government show a commitment to Canada’s energy industry and the hundreds of thousands of Canadians who work in the industry,” said Tim McMillan, President and CEO of CAPP.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.