MRO Magazine

Canada’s oil industry to endure losses for second consecutive year in 2016

April 29, 2016 | By MRO Staff

OttawaCanada’s oil and natural gas extraction industries are expected to be in the red again this year, according to The Conference Board of Canada’s latest outlooks for the industries. Following a record pre-tax loss of more than $7 billion last year, Canada’s oil extraction industry is expected to post losses of over $3 billion in 2016. Meanwhile, Canadian natural gas producers losses are expected to total $1 billion in 2016.

Canada’s oil producers are in for another tough year but conditions are gradually improving,” said Carlos Murillo, Economist, The Conference Board of Canada. “Next year, a combination of cost-cutting measures, increasing production and slightly higher oil prices should boost industry profits, helping the industry return to the black in 2017.”


  • Canada’s oil extraction industry is expected to face another challenging year, with a projected pre-tax loss of just over $3 billion in 2016. Canadian oil producers are forecast to return to profitability in 2017—the result of a boost in revenues due to rising crude prices and expanding production.
  • West Texas Intermediate oil prices are forecast to gradually increase from US$39 per barrel in 2016 to about US$65 per barrel in 2020.
  • Canada’s natural gas extraction industry is expected to post a loss of $1 billion this year, following a similar loss of $1.1 billion in 2015.

Available crude oil supply will continue to exceed demand over the next two years. However, the surplus is expected to gradually shrink as global production growth slows to match demand. This, in turn, will set the stage for a steady increase in crude oil prices starting in 2018. The Conference Board forecasts West Texas Intermediate (WTI) prices to gradually increase from US$39 per barrel in 2016 to about US65$ per barrel in 2020.


Global demand for crude oil is expected to continue to expand, albeit at a slower pace due to weaker demand growth from economies across Asia and slight contractions across OECD economies, particularly in Europe. The International Energy Agency expects global demand to grow at an average annual pace of 1.2 per cent through 2020, compared with 1.4 per cent in the previous five-year period.

Despite lower oil prices and cutbacks in investment, Canadian oil sands production is expected to continue to increase, as a number projects that are under construction begin producing. Oil sands projects are planned with a production lifespan of more than 30 years and are based on a long-term view of crude oil prices.

Canada’s Gas Extraction Industry
Canadian natural gas producers are also in for another tough year, as North American natural gas and natural gas liquids (NGLs) prices remain low. The corresponding sharp decrease in revenues this year is expected to be unmatched by cost-cutting measures of similar magnitude and speed, thus leading to a large drop in profits for Canadian producers. The industry is projected to post a $1 billion dollar loss in 2016.

However, given anticipated slow but steady production increases, a firm-up in energy prices, and significant reductions in cost, the industry is forecast to return to the black next year.

Despite the brighter outlook over the coming years, The Conference Board of Canada anticipates that the industry’s fortunes will continue to be tied to regional markets. No material volumes of Canadian liquefied natural gas (LNG) are expected to reach global markets before the end of the decade.

Globally, a subdued economic outlook is expected to result in weaker growth in demand for gas. Despite that, the natural gas market is expected to continue to expand, largely driven by LNG trade opportunities. Given the current number of projects under construction in U.S. and Australia, however, the LNG market appears to be well supplied and prospects for Canadian LNG export projects continue to fall behind.

Join Carlos Murillo as he discusses the outlook for Canada’s Oil and Gas extraction industries during a live webinar on May 4, 2016 at 3 PM ET.


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