Capital spending by Canada's oil and gas producers hit a historic low in 2020, but the industry will see a C$3.36 billion (US$2.66 billion) bounce in upstream spending this year, mostly in Alberta and British Columbia, according to a forecast by the Canadian Association of Petroleum Producers (CAPP).

The industry was pounded last year by the crude oil price war between Russia and Saudi Arabia as well as the economic fallout from the COVID-19 pandemic. For more information, see September 25, 2020, article - COVID-19 Casts $33 Billion Shadow Over Canada's Oil & Gas Investments.

CAPP forecasts capital spending in the sector to be C$27.3 billion (US$21.6 billion) this year, which is C$3.36 billion (US$2.66 billion) more than the estimated investment of C$24 billion in 2020.

The association noted that its initial forecast for 2020 was C$37 billion (US$29 billion), but planned spending then took a C$12 billion (US$9.5 billion) nosedive.

The 2021 forecast hinges in part on the availability of COVID-19 vaccines globally, with hopes that the vaccines will lead to higher economic activity and energy demand. The association said Canada's oil and gas investments have been on the decline since 2014, when they amounted to C$81 billion (US$64 billion).

The forecast includes investment jumps of 18% and 29% for Alberta and British Columbia, respectively. Saskatchewan is expected to see a 5% increase, while spending in Newfoundland and Labrador is forecast to remain flat.

Industrial Info is tracking high-and-medium-probability oil and gas production projects, worth nearly US$16 billion, which are planned to kick off construction this year in Canada. High-probability projects are those that are assessed as having an 81-99% likelihood of moving forward as planned. Medium-probability projects have a 70-80% likelihood.

Alberta has the lion's share of the kickoff activity, with nearly US$11 billion worth of planned projects. Among them is MEG Energy Corporation's (Calgary, Alberta) Phase I May River Bitumen Production Field & Processing Plant near Conklin. The operation would have a capacity of 40,000 barrels per day (BBL/d). Construction is planned to kick off in fourth-quarter 2021, with completion in fourth-quarter 2023. For more information, see Industrial Info's project report.

North of Christina Lake in Alberta, Cenovus Energy Incorporated (NYSE:CVE) (Calgary) has proceeded with detailed engineering for the 45,000-BBL/d Narrows Lake Steam-Assisted Gravity Drainage (SAGD) Bitumen Production Plant. The first phase of a three-phase project, construction is planned to kick off in third-quarter 2021, with completion in third-quarter 2022. Cenovus was among several independent oil and gas producers in North America that sharply reduced their planned capital expenditures last year. For more information, see Industrial Info's project report and March 15, 2020, article - Oil & Gas Producers Slash Capital Outlays, Citing Uncertainties over COVID-19, Crude Oil Price War.

British Columbia is home to more than US$1.7 billion worth of medium- and high-probability oil and gas production projects that are planned to kick off this year. Located 20 miles west of Fort Saint John, construction on Phase I of ARC Resources Limited's (Calgary) Attachie East Natural Gas Processing Plant is planned to kick off in the second quarter, with completion in second-quarter 2022. The plant would have an inlet capacity of 90 million standard cubic feet per day of natural gas and a natural gas liquids (NGL) production capacity of 7,500 BBL/d. For more information, see Industrial Info's project report.

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