Minimal drilling for Canadian oil patches despite the high price

By 2050, the chairman of Canada’s World Oil Council has stated that Bill C-69 is curbing investment by net zero.

Corporate and state royalties are ready to break records, but soaring oil prices have only brought moderate enthusiasm to Canada’s oil patches, and new drilling is minimized.

ARC Energy Research Institute Estimate For the Edmonton Par oil benchmark, the average barrel price this year is $ 122.64, almost double the average price of $ 62.42 in 2017. However, while more than 7,000 wells were drilled that year, only slightly more than 6,000 are expected to be drilled. In 2022.

Kevin Beirne, a North American oil market analyst at S & P Global Commodity Insight, said his enthusiasm for the energy sector has been curtailed.

“Things are better, but it seems that almost no one is excited …. The boom in the past is gone compared to the prices and activities we see. It’s just not there,” Burn said. Said in an interview.

“It’s a modest and responsible pace of growth. There’s also headwinds here. There’s inflationary pressure that also pushes up the cost of drilling, which makes it less attractive to do.”

At the beginning of the decade to 2016, energy companies spent more on drilling and exploration than on profits. Birn says it can’t last forever.

“The conversation between investors and businesses now needs to focus on capital discipline, capital efficiency, debt reduction, margin improvement, and the return of its value to me as an investor.” He said.

“We see stock repurchases and tax dividends, special dividends and voluntary repurchases, and frankly, we see them rewarding.”

ARC expects oil and gas companies to generate record $ 242.1 billion in revenue in 2022. General and administrative expenses and royalty and tax payments leave $ 146.8 billion in cash flow. Capital investment is expected to be $ 42.2 billion, and the industry will continue to earn more than $ 100 billion this year.

But that money may not be worth it before.

“The labor market is tight. People were fired and went out to do something else to support their families, right? The equipment they had was moved across borders because of good activity. “I did,” said Burn.

Obstructive factors

Richard Masson, chairman of Canada’s World Oil Council, says oil patches now have “quite grand” funding, but efforts to reach net zero by 2050 are an investment. It discouraged people to maintain their forehead and career in the sector. ..

“Many people feel that the industry has been burned before. It’s such a cyclical industry,” Masson told The Epoch Times.

He said the story that oil has no long-term future is “it’s not that easy for people who have entered other industries to say, because they’ve built a lot of ground during this time.” rice field. Maybe I’ll go back and bet on the future of oil. “

“I’m not thinking about migration, so I think oil has a long-term future. [to alternatives] It will happen easily, “he added. “But for those who make a living from it, this story makes a difference.”

According to Masson, most oil production is not from new wells, so Alberta has earned up to 40% royalties on most oil production. Alberta’s oil and gas royalties are expected to reach $ 24 billion this year, crushing the 2005 record of $ 14.35 billion.– –06. Saskatchewan expects $ 867.5 million from 2022 royalties.– Fiscal year 23. BC is moving to a new oil and gas royalty system that taxes producers at about the same rate as Alberta, and the new system predicts that the state’s revenues will increase by $ 200 million annually.

Despite the value of oil and gas to public resources, Masson says the federal government has created uncertainty in its regulatory process, which has further weakened investment.

“Even under the old system, it was very difficult to allow new activities, so it took a couple of years for the oil sands project to get permission. Or the pipeline—what in Northern Gateway and Energy East. I know what happened. Those things took years and then died anyway, “he said.

“new [Impact] Rating method, Bill C-69, no one has actually tried it on a new project yet, so I don’t even know how it works. The new process has not been tested, so there is now a lot of uncertainty. This will probably be even worse than before. “

Energy efficiency has leveled off domestic demand, and investors are wary of increasing oil production without a reasonable chance to export it abroad, Masson said. With the cancellation of Northern Gateway, Energy East and Keystone XL, investors may lose billions of dollars and businesses may not be able to retry without taxpayer support.

“Building an oil pipeline in North America now seems to be one of the most dangerous things a company can ever do. If anyone wants to build a pipeline, it must be guaranteed by the government. Very likely to have to [on] I’m back soon, “he said.

“Government approval and cost performance are so poor that we can’t imagine a company wanting to undertake it.”

Lee Harding


Lee Harding is a Saskatchewan-based journalist and think tank researcher and contributor to The Epoch Times.

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