MRO Magazine

Canada’s oil industry losses to reach $10 Billion in 2016

October 6, 2016 | By MRO Magazine

Ottawa – Ongoing revenue woes, combined with a slower than anticipated cost cutting response, are leading to another poor year for Canada’s oil producers. Following record losses of $11 billion in 2015, Canada’s oil extraction industry is on track to post a second consecutive year of shortfalls – to the tune of $10 billion, according to The Conference Board of Canada’s latest outlook for the industry.

“Canadian oil producers continue to be challenged by the extended battle for market share that has kept global crude prices stubbornly low. For the first time in recorded history, the oil industry is expected to post not only the largest level of losses but also back-to-back consecutive losses,” said Carlos A. Murillo, Economist, The Conference Board of Canada. “The industry should return to the black towards the second half of 2017, as oil prices are anticipated to recover gradually, in the context of a more balanced market.”


  • – Canada’s oil extraction industry is expected to face another challenging year, with a projected pre-tax loss of $10 billion in 2016.
  • – Canadian oil production is expected to contract slightly this year for the first time since the 2008 global financial downturn.
  • – The industry should return to the black in 2017 as oil prices recover and industry costs are reined in. West Texas Intermediate oil prices are forecast to gradually increase to US$67 by 2020.

The industry’s profitability issues are leading to a significant pullback in investment. Investment by Canada’s oil producers was estimated to have been slashed by close to $25 billion in 2015, with cutbacks expected to continue this year and next. From 2014 to 2017, industry investment will have been cut by an estimated $38 billion.


The pullback in investment will, in turn, result in lower production levels. Canadian oil production increased marginally in 2015, as rising oil sands production offset declining conventional crude oil output. This year, crude oil production is expected to decline by 1 per cent, as a result of ongoing investment cutbacks and the disruptions from the Fort McMurray wildfires earlier in the year.

At the global level, a slowdown in production increases – largely the result of reduced investment – and steady demand increases for crude suggest a more balanced market in the future. This should help oil prices increase steadily to US $67 by 2020 and allow Canada’s industry to return to the black starting in 2017. An agreement reached in late September amongst OPEC’s members to cutback output has the potential to further support prices beyond current expectations. But, despite these positive signs, elevated stock levels and an uncertain global macro economic outlook remain as key downside risks to the price outlook. Furthermore, whether words translate into action remains to be seen in the context of OPEC’s agreement.

Source: Conference Board of Canada


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