CANADIAN UPSTREAM OUTLAYS TO RISE IN 1991

Canadian upstream spending may increase 20% in 1991 with a 30% increase in Alberta, says the Canadian Petroleum Association. CPA Pres. Doug Baldwin said some spending plans already in place point to increased activity. But he cautioned that companies could cut spending if oil prices drop substantially. The CPA executive, also president of Esso Resources Canada Ltd., said 1991 outlays will represent an "investment spike," not a new base level for industry spending.

Nov. 26, 1990

2 min read

Canadian upstream spending may increase 20% in 1991 with a 30% increase in Alberta, says the Canadian Petroleum Association.

CPA Pres. Doug Baldwin said some spending plans already in place point to increased activity. But he cautioned that companies could cut spending if oil prices drop substantially.

The CPA executive, also president of Esso Resources Canada Ltd., said 1991 outlays will represent an "investment spike," not a new base level for industry spending.

CPA said upstream spending in 1991 for Canada will be $8-8.5 billion (Canadian), up from $6.4-6.8 billion expected in 1990. Drilling will increase to 6,500 wells from about 5,800 in 1990. Upstream spending in Alberta for 1991 will increase 30% to $6.5 billion.

In addition, pipeline construction spending will amount to as much as $2 billion next year.

The Independent Petroleum Association of Canada forecast 1991 upstream spending of $7.5 million and drilling of about 6,200 wells.

Gerry Protti, IPAC executive director, said continuing low return on investment, along with high debt levels, will limit drilling plans.

Protti said return on investment for the Canadian industry will be less than 6% this year despite higher oil prices triggered by the Middle East crisis.

Rudy Unis, president of the Canadian Association of Oilwell Drilling Contractors, said the drilling sector expects to be in a slump for at least 3 years. He said most companies will not be able to do much more than continue operating and make interest payments on their loans.

A number of companies, including Gulf Canada Resources Ltd., Norcen Energy Resources Ltd., Poco Petroleums Ltd., and Esso Resources Ltd., have disclosed plans to hike spending in 1991.