A Contemporary Look at the Canadian Oil Scene

Abstract

Introduction Since the 1947 discovery of oil at Leduc in Alberta, the Canadian petroleum industry has grown into a leading resource industry and has become the producer of Canada's single most important mineral. Today the Canadian petroleum industry is a major and dynamic force in the entire Canadian economy. The wellhead value of the 1971 petroleum production will surpass $2 billion. production will surpass $2 billion. Over the past decade, the Canadian petroleum industry has invested nearly $10 billion in the search for and the development of new Canadian oil reserves. Expenditures during 1970 amounted to approximately $1.5 billion. During the decade of the 70's, it has been estimated that the petroleum industry in Canada will require new capital in excess of $20 billion and that no more than $13 billion of this requirement can be generated from its own cash flow. The industry is a substantial consumer of supplies and equipment produced elsewhere in Canada, and particularly in Eastern Canada. It has provided a major stimulus in the industrial provided a major stimulus in the industrial development that has, and. that still is, taking place in Western Canada, where the predominantly place in Western Canada, where the predominantly rural economy of the late 1940's has been supplemented by many and diverse industry operations allied to the petroleum industry. The Canadian petroleum industry has become truly a national rather than a regional industry. For more than 20 years, the petroleum industry has been regarded as primarily a Western Canadian industry. This has changed significantly in the last few years, with exploration underway in just about every area of the country and with present estimates indicating that the four western provinces of Canada contain but a quarter of the nation's potential oil and natural gas resources. It also has potential oil and natural gas resources. It also has been estimated that only approximately 11 percent of the ultimate potential oil reserves and approximately 9 percent of Canada's ultimate potential gas reserves have been discovered to potential gas reserves have been discovered to date. Many long-range forecasts indicating the ultimate potential and the capital requirements of the potential and the capital requirements of the Canadian oil and gas industry have been presented in the past year. I would like to concentrate today on a more contemporary theme, looking at the position of the Canadian petroleum industry as it position of the Canadian petroleum industry as it enters the year 1971 and forecasting what this year may hold for it. FORECAST FOR 1971 Production of crude oil and natural gas liquids will show a gain of 17 percent, reaching a total level of 1,730,000 B/D compared with 1,475,000 B/D in 1970. Natural gas sales, which jumped 16 percent in 1970, will increase an additional 10 percent in 1970, will increase an additional 10 percent in 1971, pushing the total to 5,250 MMcf/D. percent in 1971, pushing the total to 5,250 MMcf/D.Production revenues in 1971 are expected to pass the $2 billion mark, but total expenditures and outlays will reach $1.8 billion, producing a $200-million surplus of revenues over expenditures. Drilling activity declined in both completions and footage during 1970, but is expected to experience a modest upturn in 1971. Geophysical activities are expected to remain about the same as 1970 Exploration expenditures are projected at $460 million for 1971, up from $398 million in 1970. It is significant to note that $230 million of the 1971 forecast will be expended north of the 60th parallel and in the east coast offshore. This will represent, therefore, no great increase in drilling or exposure, but rather a higher cost for the drilling to be accomplished during the year. Monies generated from land sales showed a drastic reduction last year; indications are that 1971 will show a somewhat more optimistic turn. Four major refining projects will go on stream in 1971, raising Canada's refining capacity by 250,000 B/D. Gas plant construction will reach a total of $280 million in new investment. MARKETS The market outlook for both Canadian oil and gas has never been more optimistic than it is for the year 1971. P. 57