As oil prices have rebounded better than forecasted and predicted, the sector is turning in solid profits, with Premier Jason Kenney urging producers to flip those profits into project spending and jobs. These price rebounds and increases are music to Alberta’s ears and a welcome sight, and it’s a sign of growing optimism within the province and its main economic driver, and has people wondering if we are on the verge of another oil boom?
Kenney is also trying to toe the line with producers and industry who have close relations with investors, who are seeking financial prudence and wherewithal after some lean years that reached a head caused by a global pandemic and crippling recession.
Alberta’s most recent budget was budgeting oil prices of $46 per barrel, and was hopeful prices would hit $56 by 2023-24. Oil prices are currently hovering well above both those benchmarks, with U.S. West Texas Intermediate and Brent Crude north of $80, which will have key economic impacts for the province and sector. It has been a long time coming with prices like these, as one would have to go back to 2014 to see similar numbers.
Alberta’s economy, largely tied to oil, has been hit hard on the unemployment front due to fluctuating and inconsistent oil prices and COVID-19, hence Kenney’s urging of producers to spend and create more jobs, which would be a welcome sight to thousands of Albertans. Large-scale projects and investments are drivers to create more jobs, and no with OPEC constraints on supply and controlling the market, brighter times seem on the horizon. More activity also means more jobs.
Mood across the industry is shifting, there is light at the end of the tunnel, and companies are preparing for a busy winter drilling season, and other projects taking shape, such as the Pathways to Net Zero initiative, which would include a 400km pipeline, manufacturing jobs, and enabling infrastructure, the economic impacts for Albertans is massive.
Rig count is vastly improved from last year – another positive sign for the province and sector, as anticipation for activity is fervent.
Shell’s proposal for a large-scale carbon capture and storage facility in Alberta is another exciting project that would create jobs and give another shot in the arm to the province.
The Line 3 replacement project, which has been substantially completed and set to be fully operational, is another shot in the arm for the sector.
These projects and investments, from both province and sector perspectives, highlight an industry that is flourishing and innovating while being able to keep up with demand for its product and services.
The oil and gas sector in Alberta is currently operating at a profit. With the cost of producing a barrel of oil roughly $30, and with prices where they are, profitability is a welcome sight after a crushing pandemic and recession. This also provides companies the opportunity to pay down debt.
For Canada to produce a barrel of oil, it also comes cheaper compared to other countries. This touches on the sector’s resiliency and ability to bounce back when in the face of hard times, and a reason why the sector is experiencing such a boom in prices and activity as we near the end of a challenging stretch.