Canada Oil & Gas Report Q2 2016 - New Market Report

Our growth outlook for Canada's oil and gas industry remains modest given mounting headwinds in both the upstream and midstream sectors amid a low oil price environment . The greatest threats are unfavourable project economics and regulatory headwinds that will hamper the growth of oil sands-driven production , midstream expansions and LNG terminal development. This is exacerbated by the likely drop in exploratory activity throughout Canadian acreage as companies revise capital expenditures in the coming year .

The latest developments in Canada's oil and gas sector are:

We are reaffirmed in our negative outlook on long-term crude production growth in Canada following the election victory for the Liberal Party in October. A low oil price outlook and insufficient pipeline takeaway capacity will combine with the government's strong environmental mandate to undermine upstream and midstream developments.

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Prime Minister Trudeau and the Albertan government's financial commitments will strengthen support for midstream projects in the province to service existing oil sands operations. However, under its new leadership, Alberta will boost its environmental mandate, undermining pre-FID upstream developments.

The proposed 50,000b/d expansion of Imperial Oil's Cold Lake bitumen project in March represents a unique opportunity for a more financially stable company to explore more efficient production methods. The extended life-time of this brownfield project supports its development but does not indicate a broader expansion of Canadian upstream capacity beyond 2017.

The announced acquisition of Canadian Oil Sands by Suncor in January for USD2.9bn will increase efficiencies at the company's Syncrude joint venture. Consolidation among larger producers supports our view that continued financial stress will threaten Canada's competitive landscape in 2016.

The negative impact of low oil prices on fixed investment in Canada will persist in 2016. We forecast real GDP growth to accelerate from 1.2% in 2015 to 1.4% this year. Beyond 2016, however, we believe that further economic rebalancing and strong private consumption will see the economy return to 2.0% growth, supported by the rollout of a public infrastructure investment programme.

The Canada Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Canada including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.

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