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New report shows optimism this year for oil and gas

Last Updated Jan 13, 2021 at 1:00 pm MDT

A pumpjack works at a well head on an oil and gas installation near Cremona, Alta., Saturday, Oct. 29, 2016. Federal financing relief for large Canadian companies announced Monday was welcomed by the oil and gas sector and the Alberta government despite conditions that linked the aid to climate change goals. THE CANADIAN PRESS/Jeff McIntosh

The report calls for capital spending to increase 14-per-cent in 2021

Prices for WCS are rebounding after trading in the negative almost a year ago

CALGARY (660 NEWS) – It’s something we haven’t heard of for quite some time: optimism about the oil and gas industry.

A new report from the Canadian Association of Petroleum Producers (CAPP) released Wednesday shows improvement in the sector when it comes to spending and investment.

The report forecasts a 14 per cent increase in upstream natural gas and oil investment in 2021 and that capital spending is expected to be around $3.36 billion higher this year.

Capital investment in the oil sands is forecast to hit $7.3 billion this year up from an estimated $6.7 billion total in 2020.

WATCH: Ottawa supporting oil and gas sector with $1.7B to clean up ‘orphaned wells:’ Trudeau

“Global demand continues to grow, gas prices are also way up. The AECO price, which is the standard Alberta price for gas is at $2.60, $2.70 right now,” said Premier Jason Kenney.

In Alberta, investment in oil and gas is expected to increase 18-per-cent to a total of $11.8 billion.

CAPP also forecasts about 3,300 new wells to be drilled in Canada this year that’s up from 3,000 drilled in 2020 but lower than the 4,250 drilled in 2019.

Last year, the provincial government announced tax relief for companies drilling new wells and $1.5 billion to support the Keystone XL pipeline project.

“It is a positive sign to see capital investment numbers moving up from the record lows of 2020,” said CEO of CAPP Tim McMillan. “This can be read as the start of what we expect will be a long road to economic recovery for the natural gas and oil industry and the Canadian economy as a whole.”

“We’ve also seen a significant uptick in drilling activity and the oilsands are producing more than they ever have in history when this spring we thought that we were looking at potential ‘oilmageddon’ in the patch because of the Saudi-Russia price war,” added Kenney.

Meanwhile, Alberta’s Energy Minister, Sonya Savage welcomed the positive report saying the oil and gas industry has suffered tremendously in the past year.

“Today’s news mirrors the considerable optimism we have recently seen in Alberta through increased drilling, rig counts and upstream development – all of which will drive jobs, revenues and further investment in our province. We have more work ahead of us, but this is a great way to start 2021 and further demonstrates the importance of Alberta’s oil and gas reserves in meeting post-pandemic demand.”

Savage added the UCP government will do what it can to help boost investment and development in the resource sector.

To date, the Alberta government has reduced corporate taxes and launched a $1-billion Site Rehabilitation Program to help the struggling oil industry rebound.

This news comes as the price for Western Canadian Selected (WCS) hit its highest since last February at close to $40 a barrel.

The price for Liquefied Natural Gas (LNG) has also seen a rise due to a cold winter so far in Asia.