Zinchuk: Oilpatch Only Spending Half What It Spent in 2014

Commentary, Energy, Regulation, Brian Zinchuk

Back in the lofty, pre-Justin Trudeau government days of 2014, back when oil was booming, pipelines were planned to east and west coasts, and Alberta and Saskatchewan were swimming in money, around $81 billion was spent in capital expenditures (CAPEX) in the Canadian petroleum industry. In Alberta, alone, the number topped $60 billion. And British Columbia and Saskatchewan got their share, too. Even Manitoba was seeing investment.

On March 1, the Canadian Association of Petroleum Producers (CAPP) forecast CAPEX of $40 billion, which is just about double the disaster year of 2020, but half of 2014. And that’s before #justinflation. What would it be if we had a federal government supportive of the industry, instead of trying to make it disappear?

Curiously, Enbridge announced on the same day its spending a lot of money in Texas, including a port facility for Houston. Funny how it’s not talking about Northern Gateway Pipeline to Kitimat, or a different pipeline to Churchill, or even Valdez, Alaska? I wonder why?

Maybe that’s because Enbridge took a billion dollar write down when Trudeau got elected and declared, “The Great Bear Rainforest is no place for a pipeline.”

On Feb. 28, Alberta announced an enormous surplus in its 2022 revenue. It’s now got money to burn on all sorts of things, from health care to seniors.

That’s pretty much entirely due to windfall funds from high oil and gas prices from much of the 2022-23 fiscal year, due mostly to the war in Ukraine, but also from the end of COVID restrictions and the opening up of global economies.

Curiously, oil prices have come down now to a point lower than they were the day the war started, almost precisely a year ago. So don’t expect a huge surplus this year. Just a decent one for Alberta.

Now, let’s imagine how much easier life would have been if a few things had been done differently since October, 2015, not just for Alberta, but Saskatchewan and the rest of Canada.

Imagine if Northern Gateway had been built and completed by 2015, instead of being obstructed by the courts, British Columbia’s provincial government and First Nations. It would have given us access to the West Coast for heavy oil/bitumen exports. How much more money would Saskatchewan have made from its heavy oil, instead of years of sometimes enormous differentials between West Texas Intermediate and Western Canadian Select benchmarks? Easily it would have been enough to build a new tertiary hospital for Regina, a new Plains Health Centre, if you please. And enough to staff it, too.

And imagine if the federal government (as well as the B.C. government) had not chased away Kinder Morgan from building the Trans Mountain Expansion. And let’s also imagine they didn’t do everything possible to make this project nearly triple in cost (which is now a taxpayer burden to be in excess of $21 billion.) How many hospitals, drug treatment centres, highways and bridges could have been built with that extra money, never mind the additional income from increased oil sales at a better price?

Teck’s Frontier oil sands project’s construction would be well underway by now, if not complete. Another $20 billion in CAPEX over several years – money that never happened. How many other projects, like Teck Frontier, might have also gone ahead? Instead, they were chased away by a government moving the goalposts on environmental regulation.

And if Energy East had been built and in service by December, 2018, as originally planned, how much more CAPEX would that have inspired, from Fort Mac to Saint John? Wouldn’t it also have given us the ability to ship oil to Europe, displacing Russian oil?

And then let’s not forget the liquified natural gas terminal Energie Saguenay, which would also be under construction now, with multiple billions in capex per year. That would be money spent in Quebec! And don’t forget the 700 kilometre pipeline to feed it, also in Quebec!

If all of these had come to pass, plus the additional oil sands and conventional oil and gas production to fill them – would the provinces have gone to Ottawa, cap in hand, begging for more health care dollars? Or would Canada be flush with cash right now, from coast-to-coast?

When I asked Saskatchewan oilfield service providers this past week if they were busy, finishing projects before spring breakup, the collect answer was “not really.”

I’m sorry, CAPP. That $40 billion in capital expenditures may be in improvement compared to the last two years, but it could have been so much more. If only we had a government for going on eight years which didn’t want to just transition the oil and gas sector out of existence, we would be rolling in it.

 

Brian Zinchuk is editor and owner of Pipeline Online, and an occasional contributor to the Frontier Centre for Public Policy. He can be reached at brian.zinchuk@pipelineonline.ca.