Canada’s upstream oil and gas industry and drilling services sector has a “very favourable” outlook for 2024, according to Enserva’s State of the Industry report released on Thursday.
Key highlights of the report show that oil prices are expected to remain strong, demand will be robust, export capacity will increase, and investment and drilling activity are set to grow during the forecast period.
The report was done by Enserva, formerly known as the Petroleum Services Association of Canada.
Enserva president and CEO Gurpreet Lail led a panel discussion in Calgary on Thursday that featured various industry experts to discuss the report’s findings and what to expect for the Canadian energy industry in the coming year.
“It’s a good news story,” she told event attendees.
Lail adds that capital expenditures are expected to grow by 10.5 per cent next year.
No longer cautiously optimistic, Lail told attendees that she is now very optimistic about the Canadian oil and gas forecast for 2024.
However, the report still acknowledges potential risks to their favourable outlook.
“That being said, there are some risks that are involved that could tamper our optimism, and government policy is one of them,” said Lail.
“We don’t know what new policies are going to look like.”
Inflation-impacted global economic growth, energy infrastructure delays, and the recent emissions announcements made at the 2023 United Nations Climate change Conference (COP28) were noted by Lail and Enserva’s report as prominent risks to the forecast.
The report mentions various ongoing downside risks, such as persisting labour issues in the oil and gas industry and federal government emission reduction policy.
Further upside risks include geopolitical disruption — like the Russian invasion of Ukraine and concerns amid the Israel-Hamas war — as well as tighter OPEC+ quotas that can impact crude pricing and pose challenges for the report’s optimistic production outlook.
After representatives from close to 200 countries discussed energy priorities at COP28 over the past two weeks, Lail told CBC News the messaging she heard about oil and gas at the climate change conference was divided — she’s still optimistic that fossil fuels are here to stay.
“Oil prices are ebb and flow right now, but our drilling activity is rising. We do see some investment coming back into the sector. There’s infrastructure that’s going to come through, so we’ve been told,” she said.
“There’s a lot of optimism right now, and I think there needs to be.”
With the West Texas Intermediate (WTI) — the benchmark North American crude blend — currently hovering around $70 US per barrel, oil prices have been gradually sliding for the past several weeks, down from $90 US in September despite various forecasts.
Meanwhile, Canada’s southern neighbour has continued to set records for oil production throughout 2023.
“When we look across the board at the United States, we’re a little envious,” said Lail.
“Because of some of the policies that they have in place, activity is picking up at a much faster pace and at a grander pace than what we have going on in Canada … but overall they’re really looking forward to 2024 and changing the narrative … [on the] energy downturn.”
Canadian oilsands production is set to reach 3.7 million barrels per day (bpd) by 2030, according to S&P Global, with the Enserva report noting a 140,000 bpd increase from last year’s forecast.
The report notes the total number of wells drilled is expected to continue to increase, from over 5,800 this year to 6,300 in 2024, with the most significant drilling activity increase set to happen in B.C.
For Alberta, drilling activity was “flat during the first half of 2023 due to wildfire evacuations,” but it’s expected to grow for the second half of this year, and potentially even into 2024, reads the report.
Alberta to see economic growth
Rob Roach, deputy chief economist with ATB Financial and a panellist for Enserva’s event in Calgary, said the report uses previous outlooks to help form this year’s outlook, and that being cognizant of risks and dramatic swings are an important part of discussions around oil and gas sector conversations.
“Right now, our baseline forecast assumes that oil prices will do relatively well next year,” Roach told CBC News in an interview.
“That does assume that OPEC continues to hold back and keep supply in check, but it could change its mind overnight. We’re really one news release away from a supply glut.”
He added the report’s favourable assumptions are reasonable, but Albertans especially are “very aware of how cyclical and up and down the oil and gas business is.”
Roach says that, overall, Alberta will see continued economic growth in 2024, and the province’s oil and gas sector is helping by producing a ripple effect through other parts of the economy.
He says Alberta is still better positioned than other parts of the country, but “households, businesses are still feeling the effects of inflation, higher prices, and are still dealing with higher borrowing costs, high interest rates.”