Updated June 2021
Figure 1.7 shows the historical and forecast of capital expenditures for Alberta’s oil and gas and oil sands sectors.
Total capital expenditures decreased an estimated 30 per cent in 2020 to Cdn$17.4 billion. The COVID-19 pandemic led to a historic drop in global oil demand and a widened supply surplus that impacted the investment environment. Low energy prices, policy uncertainty, and market access constraints continued to impact drilling programs and large-scale bitumen projects. Capital expenditures will remain below peak levels seen in 2014 over the 10-year forecast period.
Oil and Gas Capital Expenditures
In 2020, the oil and gas sector (excluding oil sands) spent an estimated Cdn$10.2 billion in capital expenditures. Due to lower drilling activity, expenditures declined by 31 per cent from 2019.
Number of Wells Placed on Production
Crude oil wells: In 2020, 1061 crude oil wells were placed on production in Alberta, down from 1745 wells in 2019.
Natural gas wells: In 2020, 591 natural gas wells were placed on production, down from 739 wells in 2019.
Forecast for 2021 to 2030
Oil and gas capital spending is forecast to increase to Cdn$12.0 billion in 2021, due to the gradual recovery in demand. This is an 18 per cent increase from 2020 expenditures. Infrastructure constraints will continue to cause some producers to delay their capital spending programs.
Capital expenditures are expected to moderately increase to Cdn$12.4 billion in 2022, as operators’ financial conditions and drilling activity improve.
Over the remaining forecast period, oil and gas capital expenditures continue to increase, in line with economic recovery and corresponding price forecasts. By the end of the forecast, oil and gas capital spending is projected to reach Cdn$16.3 billion.
Oil Sands Capital Expenditures
Oil sands capital expenditures are estimated to reach Cdn$7.2 billion in 2020. This is 27 per cent decrease from Cdn$9.9 billion in 2019, and the lowest level of oil sands investment since 2005. Producers focused less on new projects and more on expansions and efficiency enhancements, with capital expenditures steadily decreasing annually since the peak of 2014.
Sustaining capital expenditures for in situ and mining projects, which is capital spent by an oil sands producer to maintain or replace fixed assets, also decreased in 2020.
Forecast for 2021 to 2030
Oil sands capital expenditures are forecasted to reach Cdn$7.8 billion in 2021. With improved prices and restored production anticipated after 2021, oil sands capital expenditures are projected to increase to Cdn$9.0 billion in 2022.
Spending in the mining sector is projected to gradually increase beyond 2022. By the end of the forecast period, oil sands capital spending is projected to reach Cdn$11.0 billion, a value that remains relatively low compared with the last decade.