Export and environmental hurdles could curb Canadian oil industry’s profits
CALGARY—Canada’s oil and gas sector will rake in $600 billion over the next five years, creating opportunities for others along the supply chain, according to a new industry outlook
The report was produced by ARC Financial Corp (ARC), an energy-focused private equity firm in Calgary.
It forecasts that in this year alone, the sector will generate $115 billion in revenue, plus $20 billion in royalties, land sales and taxes. Companies will also pump about $50 billion of investment into infrastructure and jobs.
“The numbers are big—the oil sands alone will invest between $15 to 20 billion a year,” says Peter Tertzakian, ARC’s chief energy economist.
Tertzakian says the investments will trickle down to other sectors across Canada.
“There will be all kinds of derivative spending benefits, from manufacturing equipment to infrastructure,” he said.
While the bulk of spending will be in Alberta, he says Ontario could see about a third of the spin-off investment.
But Tertzakian cautioned that several snags could stand in the way of those gains.
“Some of the main challenges will be accessing good, skilled labour and the industry’s ability to innovate and bring costs down,” he says.
Companies will also need to manage tighter environmental rules and volatile commodity prices over the next five years.
“Another big issue that’s recently emerged is the stagnant U.S. market, where we’re selling our oil and gas at a discounted price,” Tertzakian said.
“As we grow production, we’re going to have to overcome regulatory hurdles and start exporting off the west coast into global markets.”
The report was commissioned in part by the Canadian Association of Petroleum Producers.