Here’s What 2021 Holds For Canada's Energy Sector?

Source: Haizhen Du, Shutterstock

Summary

  • Canada expects a 14 per cent rise in oil investment and upstream gas.
  • A global stance towards new and clean energy resources like lithium, hydrogen and geothermal among others can help the Canadian energy sector.

As the world tries to restore normalcy and largescale vaccine inoculation campaigns are being rolled out against COVID-19, market experts believe that Canada's energy sector will witness a boost in 2021. Despite the current decline in overall global supply, it is being projected that the demand is going to exceed supply at some point this year.

 

Can we expect some stability?

 

Due to the lockdown situation and low demand, the oil and gas sector was hit hard by the pandemic, leading to a significant drop in investments. However, the Canadian Association of Petroleum Producers (CAPP) says that this trend will end this year and stability will be restored.

To explain this in numbers, the association says oil investment and upstream gas will rise by 14 per cent rise. In 2020, the capital spending in the sector was C$24 billion, which is now expected to increase up to C$ 27.3 billion.

 

Canada eyes more oil wells as global demand projected to grow

 

Bracing for the boost in this sector, the country is set to drill 3,300 new oil wells, which is a 10 per cent increase as compared to last year.

According to the International Energy Agency, the global oil demand will increase by five per cent by 2030 and the demand for natural gas is expected to increase by 15 per cent by 2030. As a result, demand for Canada's natural gas and oil is expected to rise.

According to the Royal Bank of Canada (RBC), the WTI crude is going to average at C$ 58 per barrel in 2021 and C$ 62.6 in 2022. In 2020, the average was C$ 48.8 per barrel.

Markets expect that the daily crude oil production in the western part of the country will regain most of its pandemic-caused lost volumes. And rising commodity prices will set the stage for production growth.

 

Focus on climate change, clean energy and M&A can boost the sector

 

With Joe Biden’s presidency across the border in the US, and pro stance on climate change, is set to boost the prospects of Canadian energy sector this year.

Focus on climate change will rebalance the 'competitive fight' between the two countries for energy investment, say market experts.

Since Canada already has a system of carbon taxes, and if the US also comes up with a similar strategy, it'll make Canadian investment space more competitive.

A global stance towards new and clean energy resources like lithium, hydrogen and geothermal among others can also help the Canadian energy sector. Carbon taxes are all also expected to rise, with some reports suggesting that the figure would reach C$ 50 per tonne in 2022 from the present C$ 30 per tonne. This can drive investments in the sectors focusing on renewable energy.

Traditional energy companies are also expected to focus on developing carbon-friendly technologies for generating energy. Major oil and gas companies can either dive into this sector or they can also acquire companies through mergers and acquisitions (M&A) that are already working on renewable resources.

 


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