Oil and gas spending to reach highest level in a decade: Enserva

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Capital expenditures in oil and gas are forecasted to exceed $40 billion in 2025, the highest level in a decade, according to a new report by oilfield industry association Enserva.

A boost in export capacity brought on by the Trans Mountain Pipeline expansion (TMX) and the forthcoming LNG Canada project, which is set to begin commercial operation in mid-2025, are driving the spending increases that are expected to grow production in the coming months.

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“We are positioned for growth over the next three to five years in a way we haven’t seen since probably the last 15 years,” Randy Ollenberger, a BMO Capital Markets analyst, said at the launch event for Enserva’s State of the Industry report, which was released Tuesday.

The increase in capacity associated with TMX boosted Canada’s export capacity by 13 per cent, he said, and the increase in capacity from LNG Canada could increase export capacity for natural gas by 20 per cent.

“These are big numbers,” Ollenbrger said. “And all of that’s going to drive incremental investments, so we are going to see growth in oil production in Canada as a consequence of the availability of that pipeline capacity, and we’re going to see growth in natural gas production.”

Capital spending in the Canadian oilpatch increased more than nine per cent in 2024 on a year-over-year basis, led by double-digit growth in the oilsands, according to the report by Enserva (formerly Petroleum Services Association of Canada), which represents fracking, oilfield construction and manufacturing companies.

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But with global oil demand expected to slow next year due to slower growth in China, Enserva expects capital spending in Canadian oil and gas to be more muted. It predicts that the capital spending increase next year will be driven by non-oilsands upstream producers in Alberta, and amount to a bit less than two per cent on a year-over-year basis.

Total capital spending in the Canadian energy sector could reach $40.2 billion in 2025, a significant increase from the $25.6 billion spent in 2021.

Enserva chief executive Gurpreet Lail said the latest capital forecast represents an “impressive benchmark” for a sector that has held steady in the face of volatile or darkening outlooks for commodity prices.

“This was no small feat, especially when you think about what the story could have been if we didn’t have two major infrastructure projects go through. We’d be telling a very different story today,” she said. “And that is what we want to get across to everybody — that infrastructure is important. It’s important to our livelihood; it’s important to Canadians.”

Oil and gas drilling was up more than five per cent this year and is forecasted to rise by about 2.8 per cent in 2025, Enserva said.

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Enserva said it expects 5,881 wells to be drilled in Canada next year, a modest increase on the estimated 5,720 wells drilled in 2024.

TMX has also helped shrink the discount on Canadian heavy oil, Enserva said, with most forecasts on Western Canadian Select (WCS) generally being revised upwards to a median price of $86 per barrel in 2025.

And following a dreadful year in 2024 for natural gas prices at the AECO hub in Alberta (with prices averaging just $1.5 per million British thermal units (Mmbtu) in the third quarter), Enserva said the median forecast for AECO in 2025 is now $3.1/Mmbtu due to a tightening market, with the startup of LNG Canada helping to draw down the storage surplus that has dampened prices for months.

The upstream sector has also had a surge in employment, according to Enserva, particularly in the services industry between June 2023 and September 2024, but oil and gas continues to have a problem attracting new talent, Lail said.

“We’re still seeing trends where we’re going to need more people come 2030 … and 40,000 people are going to be needed by 2030,” she said. “And by 2050, 70,000 people are scheduled to retire. So, if we do the math, we need a lot of people coming into this industry.”

• Email: mpotkins@postmedia.com

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