North American oil and gas producers are awash in cash, thanks to a global energy crisis that pushed oil prices above US$100 per barrel earlier this year, contributing to high inflation.
Even so, the Canadian Association of Petroleum Producers is forecasting that capital spending by Canadian oil and gas companies could grow by $6 billion this year to $33 billion, compared to $27 billion in 2021, though the spending in B.C. could be muted by regulatory uncertainty. It forecasts 80% of the spending in 2022 — $24.5 billion — will be in Alberta.
“Only around 40% of estimated cash flow is currently being set aside for capital expenditures compared with an average above 100% in the years before the pandemic,” the Bank of Canada noted in a recent Business Outlook. The Evaluate Energy report found that 18 Canadian natural gas producers analyzed were the only subsector to have a “post-pandemic spend” that is higher than the spending between 2018 and 2020.
CAPP is now forecasting oil and gas companies will spend $4.1 billion in B.C. in 2022, with much of the spending coming later in the year. Canadian oil and gas producers in Canada are timing their investments in production to coincide with investments in pipeline and export capacity, notably the Trans Mountain pipeline expansion.