Oil & gas capital spending cut in half since 2014

At the end of 2014, capital expenditures in Canada’s oil and gas sector sat at nearly $21 billion. Today, it’s under $10.5 billion.

Statistics Canada recently released updated data regarding capital expenditures for the oil and gas extraction industries, and I thought I’d take a look to see what was there.

The data is recent as of the second quarter of 2023 (April through June) and goes back 10 years, to the second quarter of 2013.

Capital expenditures refers to spending on machinery, equipment, buildings, and other goods that have useful lives of more than one year. It also includes spending on major repairs to these goods.

When a company spends on capital investments, it’s an indication on the economic viability of that business since upfront capital costs are expensive and need to be recouped over a longer period.

Increasing trends in capital spending may indicate investor confidence. Decreasing capital investments may indicate waning confidence.

Another thing to keep in mind is that sometimes investments increase as companies establish infrastructure before they start production. In this case, they may be building processing facilities, buying mining equipment, setting up office space and housing facilities, and so on. Once those are all built, there is less of a need to build more.

The data is for the country as a whole, as did not delineate by province or territory. It also doesn’t delineate based on resource—it doesn’t say how much is spent on crude, bitumen, or natural gas separately.

In the second quarter of 2023, capital investments in oil and gas activities came in at $10.429 billion. This was up 10.088 billion in the first quarter, as well as up from $8.907 billion in the previous second quarter.

Here is a look at every quarter over the last decade.

What we see here is that capital in this sector has been increasing since the second quarter of 2020. Now, to be fair, two if those years seem to be recovering from lost investments during the early months of the COVID-19 pandemic.

That being said, the industry hit pre-pandemic levels a year ago, so any growth now is no longer recovery growth.

Also, notice that other than a short period of growth in 2017, capital spending in the oil and gas sector had been declining steadily since the end of 2014. And the period of growth in 2017 still saw a dip in the third quarter.

This means that even if we include the apparent recovery period between the second quarter of 2020 and the second quarter of 2022, this is the most sustained growth we’ve seen since 2014.

Although the 17.09% increase in capital spending over the last year is still smaller than the 22.04% increase we saw between the fourth quarter of 2016 and the fourth quarter in 2017.

Most of this graph falls within the time that the Liberal Party has been in power in the federal government. As such, it may be tempting for some readers to conclude that the 5-year decline in capital investments was Justin Trudeau’s fault, but let’s look at the data a bit more carefully.

The Liberal Party came to power in the fourth quarter of 2015. By the end of that quarter, the amount invested into capital expenditures in the oil and gas sector had already dropped in half.

Here, let me zoom in a bit.

Between the fourth quarter of 2014 and the fourth quarter of 2015, when the Liberals took office, capital spending in this sector had already dropped from an all-time high of $20.87 billion to $10.68 billion, a decrease of $10.19 billion, or 48.82%. And that’s under Stephen Harper’s Conservative government.

Even if we look at the entire loss in capital spending under Trudeau, including when it bottomed out at the start of the pandemic, it’s still not as large as a drop.

Between the fourth quarter of 2015 and the second quarter of 2020, capital investment in oil and gas declined by $6.73 billion, from $10.68 billion to $3.95 billion.

In other words, of the $16.92 billion in capital investment lost between the peak of the fourth quarter of 2014 and the bottom of the second quarter of 2022, more than 60.2% of that decline took place before the Liberals even took office.

Capital expenditures in the third quarter of this year are at their highest levels since the second quarter of 2017, when they were at $10.857 billion.

Support independent journalism

By Kim Siever

Kim Siever is an independent queer journalist based in Lethbridge, Alberta. He writes daily news articles, focusing on politics and labour.

Comment on this story

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: