Capital spending in Canada’s oilsands sector looks set to continue to dwindle as pipeline bottlenecks persist and the Alberta government’s production limits remain in place.
Oilsands leader Suncor Energy Inc. announced Monday it is keeping spending on oil-related projects flat, with a 2020 capital program of $5.4 billion to $6.0 billion.
Husky Energy Inc. said earlier in the day that it’s cutting capital spending for 2020 and 2021 by a total of C$500 million (to $3.2 billion to $3.4 billion in 2020).
While other major producers have yet to release spending plans for next year, the projections from Husky and Suncor show energy companies may continue to focus on wringing more profit from their existing output, rather than plowing money into churning out more barrels.
After a year in which Canadian oil companies’ output was cut by mandatory production limits, Suncor is projecting a 5% production increase for next year, while Husky sees a 4% boost.
“Looking forward, we will continue to focus on value over volume,” Suncor Chief Executive Officer Mark Little said in a statement. Suncor’s overall capital budget is increasing next year, but the added spending is being directed toward initiatives that will increase the company’s free funds flow, such as a cogeneration facility, digital technology initiatives and a bi-directional pipeline connecting the Suncor Base Plant to Syncrude.
The oilsands, which contain the world’s third-largest reserves of crude, have struggled to recover from the 2014-2016 downturn and a shortage of pipeline space that has weighed on prices and restrained production growth. Capital spending in the oilsands already was set to decline for the fifth straight year, to C$12 billion this year from C$33.9 billion in 2014, according to the Canadian Association of Petroleum Producers.
© 2019 Bloomberg L.P.