It’s been a strange time for Canada since the U.S. election. The barrage of threats and bizarre claims from U.S. President Donald Trump have destabilized the Canadian dollar, hammered stock markets, and resuscitated talk of a national pipeline system that would move western Canadian product to the East Coast.
POLITICAL/REGULATORY CLIMATE
At the federal level, Canada is not well-positioned to manage what appears to be a looming trade war, as lame duck Prime Minister Justin Trudeau, plagued by scandals and plummeting public confidence, announced in January that he would be stepping down as leader of the Liberal Party amid threats from the opposition to bring down his minority government in a non-confidence vote. As a result, the response to President Trump’s threats has been led as much or more by the Premiers of Canada’s provinces, rather than the feds. The unprecedented cooperation between the provincial leaders has also galvanized public support to fight off this threat to the Canadian economy.
One example is the shift in mindset from the public and politicians regarding the construction of a national pipeline, which would allow deliveries of western Canadian crude directly to eastern domestic and international markets. In the long term, reducing Canada’s dependance on the U.S. as a trading partner could make for a stronger Canadian economy and provide increased stability for oil and gas producers. Currently, public support for a national pipeline is running at more than 80%.
Also, as candidates to replace Trudeau appear, many of them (as well as senior party officials) have begun to distance themselves from the anti-oil and gas policies and rhetoric that have caused so much damage to the Canadian oil patch and broader national economy.
Nonetheless, the federal government continued its unrelenting attack of fossil fuels last year, announcing a framework for an emissions cap on fossil fuel development in December. The measures, targeted and highly punitive, will require emissions from the oil and gas sector to decrease by at least one-third by 2030, an unattainable goal without devastating the Canadian economy.
The cap-and-trade model would allow producers to purchase offsets, although it is unknown what limits would be imposed. The cap would apply to upstream oil and gas, including bitumen and crude oil production, oil sands surface mining and bitumen production, upgrading bitumen or heavy oil, plus production and processing of natural gas and liquified natural gas (LNG).
Until Canada’s federal government discontinues targeting oil and gas production and reverses the myriad of regulations and bills they’ve implemented to eliminate fossil fuels use and extraction, it will be difficult for producers to attract the investment dollars they need. That investment would ensure the growth required to supply Canadian and international markets.
PIPELINE POTENTIAL
It remains to be seen if Canadians, and the multiple provincial governments across the country, are sufficiently galvanized to take the necessary steps required to approve and build a national pipeline, particularly once the trade war threat subsides. It would be a massive undertaking, as the federal government would have to undo key legislation—such as Bill C-69, Canada’s infamous “no more pipelines” law.
There could also be some early winners, if a trade war does indeed occur, such as TransMountain Pipeline, which is currently operating below its 890,000-bopd capacity and not expected to reach full volume until 2028. But producers could opt to sell their crude overseas earlier, if tariffs come into effect, which would shift the economics and make the high tolls on TransMountain more palatable.
Regardless, the market chaos in North America, warranted or not, will remain until the threats from the U.S. subside, which in turn may impact spending plans, drilling levels and production growth.
Putting aside trade wars for a moment, the outlook for 2025 is mostly positive for Canada’s oil patch. The February Oil Market Monthly Report from the International Energy Agency (IEA) indicated an increase in global oil demand for 2025, led by China, India, and other Asian nations.
And with oil prices relatively stable, the surge in Alberta’s AECO-C Hub spot natural gas price in early 2025 has been welcome news. Ironically, the battering that the Canadian dollar has taken since the U.S. tariffs were first threatened has been a boon to producers that sell their products to American markets.
CAPITAL SPENDING
As usual, forecasting spending plans is tricky, as they are always subject to change. Enserva, which represents Canadian service companies, has projected that expenditures will exceed C$40 billion for the first time in ten years. But any protracted trade war would likely reduce that total significantly, particularly if supply chains are impacted and prices for goods increase.
However, the biggest spenders in the Canadian market do not all appear to share Enserva’s enthusiasm. Suncor has announced a budget of C$6.1-6.3 billion, which would mean a slight decrease or no change from last year’s estimated $6.3-6.5 billion; Canadian Natural Resources Limited is more aggressive at $6.2 billion, up 13.5% from its estimated $5.36 billion in 2024; Cenovus, has a projected spend of $4.6 – $5 billion, up more than 10% from last year’s $4 – 4.5 billion; Tourmaline Oil Corp. has announced spending of $2.98 billion, up almost 37% from $2.18 billion in 2024, and Imperial Oil has announced it will spend $2.0 billion this year, an increase of 17.6% over $1.7 billion the year prior.
MERGERS AND ACQUISITIONS
Mergers and acquisitions were already expected to decrease slightly in 2025, but any prolonged period of volatility could create opportunities for companies with strong balance sheets. According to Calgary-based Sayer Energy Advisors, M&A activity was up substantially in 2024, reaching C$19.4 billion, an increase of 17.6%.
Last year, four deals represented $14.5 billion of this total, or about 75%. In October, CNRL acquired assets from Chevron Canada Limited for $8.8 billion in an all-cash deal, including Chevron’s 20% stake in the Athabasca Oil Sands Project, 20% of the Muskeg River and Jackpine oil sands mines, plus Chevron’s 20% interest in the Scotford Upgrader and Quest carbon capture and storage facility, both north of Edmonton, Alberta.
In November, Ovintiv Inc. acquired Montney assets from Paramount Resources Ltd. for $3.3 billion. The assets, located near Ovintiv’s operations in the area. also include midstream infrastructure access.
Two corporate transactions round out the top four purchases in 2024. In August, Tourmaline Oil Corp. announced the purchase of Crew Energy Inc. for $1.1 billion, and in late December, Vermilion Energy Inc. announced its acquisition of Westbrick Energy Ltd. for just under $1.1 billion.
DRILLING/PRODUCTION
Drilling was up slightly in 2024, with 5,769 wells drilled, compared to 5,390 in 2023, an increase of just over 7%, according to the Daily Oil Bulletin (DOB). Approximately 75% of the wells targeted oil.
In Alberta, DOB said there were 3,652 wells drilled, up 7.9% from 3,384 in 2023. In Saskatchewan, drilling was down 1.6% to 1,317 wells versus 1,338 the previous year. British Columbia’s activity continues to climb, up almost 16% to 596 wells drilled, compared to 514 wells in 2023. And Manitoba had 193 wells, an increase of 26% from 153.
For 2025, the Canadian Association of Energy Drilling Contractors is predicting that drilling will increase over 7%, to 6,604 wells, with similar increases in employment levels and drilling hours.
World Oil’s survey results are less optimistic. The Canadian Association of Petroleum Producers is projecting drilling nationally to decrease 2.6% to 5,610 wells. British Columbia said its drilling totaled 599 wells in 2024 but offered no 2025 projection. Ontario said its drilling will more than double, from just five wells in 2024 to 12 in 2025. Alberta, Saskatchewan and Manitoba failed to submit a response.
CAPP said that Canadian oil production hit a record high of 5.077 MMbpd during 2024. Active producing wells totaled 75,147, yielding an output per well of 65.6 bbl bpd. Alberta produced the lion’s share of output at 3.98 MMbopd. British Columbia said that its average was 136,284 bopd.
CAPP also said that Canadian natural gas production averaged 18.1 Bcfd. Within that amount, British Columbia reported output of 7.6 Bcfd.
LAND SALES
Land sale totals were up slightly in 2024, boosted by British Columbia resuming postings in December. Overall, the industry spent C$534.4 million ($655.17/hectare), compared to $509.6 million ($460.85/hectare) in 2023.
In Alberta, spending was up 9.3% last year, with $474.6 million collected ($653.70/hectare), versus last year’s total of $434.4 million ($498.68/hectare).
Saskatchewan recorded a decline of 21.8%, to $52.82 million ($681.05/hectare), compared to $74.66 million ($322.23/hectare) in 2023. BC’s only land sale brought in just over $128,000 ($162.53/hectare), and Manitoba garnered $876,479 last year ($347.09/hectare), up 33.5% from $544,319 ($181.28/hectare) in 2023.
