CANADIAN UPSTREAM OUTLAYS TO SHOW GAIN

Sept. 10, 1990
Exploration and development spending in the Canadian oil industry will increase by as much as 12% this year from the 1989 level, the Canadian Petroleum Association predicts. But CPA does not expect spending to be affected by the Middle East crisis and the resulting runup in oil prices. CPA Vice Pres. Hans Maciej said there may be increased drilling in 1991-but only if current higher oil prices are sustained.

Exploration and development spending in the Canadian oil industry will increase by as much as 12% this year from the 1989 level, the Canadian Petroleum Association predicts.

But CPA does not expect spending to be affected by the Middle East crisis and the resulting runup in oil prices.

CPA Vice Pres. Hans Maciej said there may be increased drilling in 1991-but only if current higher oil prices are sustained.

Alberta producers are earning an additional $16-18 million (Canadian)/day before royalties and taxes as a result of rising oil prices. Light crude prices at the end of August were more than $34 (Canadian)/bbl, up from a July average of $20/bbl.

BREAKOUT OF SPENDING

A CPA report forecast Canadian companies will spend $6.6-6.7 billion in 1990 on exploration and development, up 10-12% from 1989. Such spending in 1989 fell 3.3% from the 1988 level.

Operating costs in 1989 rose 9.3%, taxes and royalties increased 4.3%, and exploration and capital spending fell 19.3% from the previous year.

CPA reported capital spending on oil sands development fell 65% to $304 million in 1989 from $864 million in 1988. Frontier spending dropped 36% to $348 million, the lowest level since 1972.

Federal Energy Minister Jake Epp said the Middle East crisis could provide added impetus for oil development. He said Ottawa has no intention of intervening to protect consumers from higher oil prices and will continue to support market based pricing.

Meanwhile, former U.S. Energy Sec. James Schlesinger told a Calgary audience he expects sustained higher oil prices for the next 5-7 years with prices of as much as $40 (U.S.)/bbl.

Schlesinger said fourth quarter demand for Organization of Petroleum Exporting Countries' oil is estimated at 24 million b/d, and there will be a shortfall of about 3.5 million b/d. He predicted increased production from other countries, including Saudia Arabia, Venezuela and the United Arab Emirates, will not make up for Iraqi and Kuwaiti production lost to the United Nations embargo.

Copyright 1990 Oil & Gas Journal. All Rights Reserved.