Oil and gas spending staged a minor comeback in 2021
National oil and gas spending rose by $3.6 billion last year
By Siddhartha Bhattacharya, ATB Economics 3 March 2022 1 min read
After three consecutive years of large declines, capital expenditures in Canada’s oil and gas extraction sector are finally gaining some traction.
National oil and gas extraction* spending rebounded $3.6 billion (+17%) from 2020 to a total of $24.6 billion in 2021. This was, however, $9.7 billion (-28%) below the pre-pandemic level in 2019 and $53.9 billion (-69%) below 2014.
Meanwhile, oil prices (West Texas Intermediate) averaged US$68/bbl last year, up sharply from US$39/bbl in 2020 and over US$10 above the 2019 level.
Given the uncertainty around the long-term trajectory of oil prices, climate change policies, transportation capacity and geopolitical tensions, companies have been hesitant to ramp up spending to levels witnessed just a few years ago.
Despite this, according to Statistics Canada’s Capital and Repair Expenditures Survey,** capital expenditures by the industry are expected to rise by 22% this year, with the majority of the increase (78%) happening in Alberta.
If oil prices continue to stay above US$90/bbl, companies may push investment even higher than expected in 2022.
*North American Industrial Classification System code 211. This does not include support activities for oil and gas extraction.
**The Capital and Repair Expenditures Survey is based on a sample survey of 27,000 businesses, governments and institutions. The survey on preliminary estimates for 2021 and intentions for 2022 was conducted from September 2021 to January 2022.
Answer to the previous trivia question: Compound interest is “the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.” Definition courtesy of Investopedia.
Today’s trivia question: Who is the province of Alberta named after?