Oil industry seeing strong growth: Conference Board of Canada
CARRIE KELLY The Pipeline
The oil industry is finally experiencing an upward economic trend, according to a report released by the Conference Board of Canada.
A revival in global demand and rising prices are reasons Canada’s oil producers can expect another period of strong profitability to begin this year, says the Canadian Industrial Outlook: Canada’s Oil Extraction Industry — Summer 2010.
“Global consumption has rebounded almost to pre-recession levels. As a result, prices have nearly doubled from their lows of 2009, boosting the industry’s profitability,” says Todd Crawford, economist with the Conference Board of Canada.
While the upward trend will be nowhere near as steep as it was in the middle of the last decade, it’s still on an ascending curve, he adds.
The Canadian Industrial Outlook says it may even get to the point where companies could see a return to fierce competition for labour, and as a result
keeping costs under control will again be a priority for Canadian companies.
The report says the good news for the oil industry favours unconventional oil.
“The oilsands right now are the dominant player in the oil industry. All of the incremental production increases will come from the oilsands,” Crawford says.
“The conventional oil industry is mature and the average production of a well in Alberta has dropped significantly — 50 to 60 per cent. So companies have to pay more to extract each barrel of oil. Conventional production is falling, but we do expect conventional production to be profitable.”
The oilsands side is headed in a different direction.
“All the attention is going to the non- conventional side of the industry,” says Crawford.
Any decline in conventional production will be outweighed by an increase in non-conventional oil production. Production in the upstream oil industry is expected to expand by 4.1 per cent
this year, the Outlook states.
Oilsands companies recent quarterly results are proving to bear out the Outlook’s position that things are moving in a positive direction.
Canadian Oil Sands Trust announced that its second quarter cash from operating activities was $358 million this year, compared with just $44 million the same quarter of 2009. Net income for the second quarter of 2010 was $237 million for Oil Sands Trust, up from $46 million in 2009. The increases primarily reflect higher revenues, the company says.
An increase in world oil prices is helping, but while the prices rose steadily in the first quarter of 2010, they remain below the 2008 peak, the Conference Board’s report states. Continuing uncertainty over the global recovery and high inventories will limit further price increases this year, it adds.
Pre-tax profits are expected rise to $8.4 billion this year, up from $1.7 billion in 2009, as revenue growth outpaces cost increases.
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WESTERN CANADIAN PIPELINE | FALL 2010
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