Oil Sands Giants Restrain Spending as Pipeline Pinch Persists
Capital spending in Canada’s oil-sands reserves look set to continue to dwindle as pipeline bottlenecks persist and the Alberta government’s production limits remain in place.
Husky Energy Inc. said early Monday that it’s cutting capital spending for 2020 and 2021 by a total of C$500 million ($375 million), and Suncor Energy Inc. said later in the day that it’s keeping spending on oil-related projects flat.
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.
The oil sands, 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 oil sands 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.