Alberta Budget: Optimism For Producers, Although Province Cites Political, Regulatory Headwinds


While not a return to the salad days of boom times, the Alberta government says there is “optimism” among Alberta’s oil and gas producers, despite political and regulatory uncertainties from the federal government.

“This is in contrast to most other sectors in Canada, according to the Bank of Canada’s recent Business Outlook Survey,” stated the government in its budget.

“Producers are well-positioned to increase spending this year, driven by favourable oil prices, increased export capacity and healthy balance sheets.”

The cautious optimism is echoed by industry groups.

The Canadian Association of Petroleum Producers’ (CAPP) latest forecast is calling for a slight increase in industry capital expenditures this year, although persistently weak natural gas prices and the resulting decision by some producers to cut spending plans could alter the numbers.

CAPP’s top executive has also highlighted “policy uncertainty” in Canada impacting the willingness to invest.

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Meanwhile, with TMX coming into service, drilling activity is expected to maintain strong momentum in the province after reaching the second-highest level since 2014 last year.

Supply growth will also come from debottlenecking, optimization and small-scale expansions.

Oilsands producers are already boosting output after extensive maintenance work, driving non-conventional oil production to an all-time high in December 2023, the province stated.

Oil production is forecast to average nearly 3.9 million bbls/d in 2024, an increase of more than 103,000 bbls/d from 2023. This will lift growth in real oil exports from an estimated 2.3 per cent in 2023 to 3.1 per cent this year.

Spending on operations and optimizing production will boost oil and gas investment by 7.4 per cent (or $2.4 billion) in 2024 after increasing an estimated 17 per cent last year.

“Rising investment will propel Alberta’s oil production and exports to expand further in the coming years. Oil production is expected to grow between two-three per cent annually and will bring Alberta’s total oil production to a record high of more than 4.2 million bpd by 2027,” stated the provincial government.

“Rising output of natural gas and natural gas liquids (NGLs) will also add to the growth in the province’s energy exports, buoyed by increased market access and growing domestic demand.”

The latter will increase in line with growing oilsands production, coal-to-gas conversions, and the commissioning of new gas-fired power plants.

Capacity expansions in Alberta’s petrochemical sector are also expected to boost in-province demand.

Non-renewable resource revenue

Non-renewable resource revenue in 2024-25 is estimated at $17.3 billion, 24 per cent of total revenue. This is a $2.1-billion decrease from the $19.4 billion forecast for 2023-24. The decrease is attributable to softening oil prices, primarily due to uncertainties around global demand. NRR is expected to increase gradually over the next two years as the market rebalances, reaching $17.9 billion in 2026-27.

WTI is expected to average US$74/bbl in 2024-25, $2.50/bbl lower than 2023-24, and remain at US$74/bbl over the forecast period.

The government is forecasting a surplus of $5.2 billion in 2023-24. Budget 2024 includes surpluses of $367 million in 2024-25, $1.4 billion in 2025-26 and $2.6 billion in 2026-27.

Oilsands payouts

During a technical briefing, provincial officials provided an update on oilsands projects that have moved or are moving into post-payout.

These include:

  • 2023: 3 projects, ~130,000 bbls/d;
  • 2024: 2 projects, ~37,000 bbls/d;
  • 2025: 1 large project, ~142,000 bbls/d.

Province cites federal ‘uncertainty’

While oil producers are spending more on operations, uncertainty about federal emissions reduction policies and their impacts are prompting companies to reinvest a smaller share of their cash flow.

“Companies are expected to continue expanding production and direct spending towards clean energy projects, but they are maintaining capital discipline and keeping a lid on exploration and development activities. Over the medium term, growth in nominal oil and gas extraction investment is forecast to ease, with an annual increase ranging between six-eight per cent in the next three years,” stated the government.

Rising output in the energy sector will support pipeline projects connecting incremental supply from liquids-rich gas plays in western Alberta and northeastern B.C. to markets.

The growing demand for pentanes plus and condensate aligns with the rising production in the oilsands, while additional pipeline capacity will supply feedstock to Alberta’s expanding petrochemical sector.

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