COVID-19 IN WESTERN CANADA: INDUSTRY IMPACT: OIL AND GAS EXTRACTION


This subsector comprises establishments primarily engaged in oil and gas field operations. Activities include exploration for crude petroleum and natural gas; drilling, completing and equipping wells; operating separators, emulsion breakers, desilting equipment and field gathering lines for crude petroleum; and all other activities in the preparation of oil and gas for shipment.

IMPACTS


Centered in Alberta, Western Canada's oil and gas sector is a large, capital-intensive resource industry generating thousands of direct and indirect jobs. Across the region, oil and gas are tapped using a variety of methods, but Alberta's oilsands are dominant in terms of oil volumes, accounting for over 70% of total output. Oilsands operators are large, deep-pocketed producers that have been trimming staff since 2018 when Alberta produced more oil than could be exported by pipeline or rail.

While employment in conventional drilling activities dropped dramatically following the pandemic's onset in 2020, core industry employment – centred in the oilsands – started the year out well, with levels in January 2021 23% higher than in January 2020. By contrast, regional employment levels for conventional drilling were down approximately 23% over the same period. [1]

In December (most recent data available), oil production from Alberta was up 1.8% compared to December 2019. Oil sands output increased by 5.1% year-over-year, while production of conventional oil was down 15.7% over the same period. [2]

Alberta's oil production operations are struggling to contain COVID-19, with eleven sites on the provincial outbreak list as of February 17.



PRE-COVID SNAPSHOT

Employed
in 2019

% of all industries

WT

82.5K

1.3%

AB

72.8K

3.2%

BC

5.6K

0.2%

SK

3.4K

0.6%

MB

0.7K

0.1%

Subsector employment is not available for the
Territories. Please note, these numbers do
not include support activities for oil and gas.

The data table for this graph is located below

Sources: Statistics Canada Labour Force Survey, Statistics Canada Economic Accounts, US Energy Information Administration

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FEMALES/MALES

WomenMen
Oil and Gas26%74%
All industries47%53%


GDP -1.7% y/y

20192018
$109.9B$111.8B

Includes support activities for oil & gas extraction


OIL PRODUCTION (CANADA)

Year Barrels Per Day
(millions)
2005 26.1
2006 27.8
2007 28.4
2008 28.4
2009 29.1
2010 30.7
2011 33.0
2012 36.6
2013 39.0
2014 43.0
2015 44.5
2016 44.1
2017 48.1
2018 52.5
2019 52.4


OIL PRICES ($USD per barrel)

Year WTI WCS
2005 $56.64 $40.84
2006 $66.05 $48.92
2007 $72.34 $54.24
2008 $99.67 $83.59
2009 61.95 $53.84
2010 $79.48 $68.54
2011 $94.88 $83.84
2012 $94.05 $77.22
2013 $97.98 $76.19
2014 $93.17 $74.04
2015 $48.66 $35.67
2016 $43.29 $29.52
2017 $50.80 $38.20
2018 $65.23 $38.51
2019 $57.00 $43.27
The data table for this graph is located below

Source: Statistics Canada Labour Force Survey

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Recent Industry Employment in Western Provinces (1,000s)

Global pandemic declared March 11, 2020

Month 2019 2020 2021
Jan 86.7 77.6 95.5
Feb 95.7 78.6
Mar 92.9 81.4
Apr 95.0 76.0
May 89.5 78.3
Jun 85.4 81.7
Jul 75.6 78.2
Aug 74.8 78.3
Sep 74.7 77.8
Oct 72.9 81.4
Nov 74.3 87.5
Dec 72.3 88.2

OUTLOOK


While the transition from fossil fuels is without a definite timeline, there is no doubt that global oil and gas production will decline in the coming decades. The U.S.-based oil and gas giant Exxon Mobil, once the world's largest company, was delisted from the Dow Jones Industrial Average in August 2020 after losing value in four of the previous six years. [3] Furthermore, U.S. President Joe Biden recently nudged the needle on energy transition by canceling the cross-border permit for the controversial Keystone XL (KXL) pipeline and in moving to have the U.S. rejoin the Paris climate agreement. [4] These decisions signal the Biden administration's environmental commitment and potentially foretell of more green action to come.

The data table for this graph is located below

Source: US Energy Information Administration, Energy Outlook, Jan 26, 2021

View graphic in plain text

Global oil production and consumption: 2016 - 2022(f)

  Barrels per day (millions)
Period World production World consumption
2016-Q1 97.4 95.9
2016-Q2 96.8 96.4
2016-Q3 97.4 97.4
2016-Q4 98.8 97.4
2017-Q1 97.3 97.2
2017-Q2 97.6 99.1
2017-Q3 98.6 99.5
2017-Q4 99.1 99.9
2018-Q1 99.4 99.4
2018-Q2 99.9 99.7
2018-Q3 101.5 100.9
2018-Q4 102.3 100.3
2019-Q1 100.3 100.1
2019-Q2 100.4 100.8
2019-Q3 100.1 102.1
2019-Q4 101.6 101.7
2020-Q1 100.7 95.1
2020-Q2 92.5 85.0
2020-Q3 90.9 93.3
2020-Q4 93.0 95.4
2021-Q1(f) 93.7 95.9
2021-Q2(f) 96.9 97.3
2021-Q3(f) 98.8 98.6
2021-Q4(f) 99.1 99.3
2022-Q1(f) 98.9 99.7
2022-Q2(f) 100.6 100.6
2022-Q3(f) 101.3 101.8
2022-Q4(f) 101.6 102.2

More immediately, the decision to revoke the KXL permit has large symbolic importance for western Canada's oil producers. Relative to other oil-producing nations, Canada is a high-cost producer as there is added cost attached to separating sand and bitumen. With this limitation, it has always been important to alleviate barriers, which KXL's 830,000 barrels per day would have done. The cancellation now places more pressure on the two other export pipelines underway (the Trans Mountain expansion project and Enbridge's Line 3) to provide the medium-term additional pipeline capacity needed. However, the absence of KXL's capacity makes it more difficult to argue for large future production expansions, which deprives the industry of a growth narrative some believe vital to investor interest.

Looking to 2021, early indications are of increased production and spending across the Western provinces. The Canadian Association of Petroleum Producers is forecasting a 14% increase in upstream natural gas and oil investment in 2021. At $27.3 billion, capital spending in the sector is expected to be around $3.36 billion higher this year, compared to an estimated total investment of $24 billion in 2020. [5]

Still, 2021 will be a subdued year by historical standards and job losses are coming. Suncor announced a full company review that will result in about 2,000 fewer employees and contractors, while the recent merger of Cenovus and Husky is resulting in similar downsizing. [6], [7] Already lean operators continue to look at strengthening their bottom line through consolidations.

Balancing the negative are hopes that the vaccine rollout and the removal of restrictive pandemic controls later in 2021 will spur oil demand as global economies pick up steam. This could lead to a higher average employment level for the year, even slightly above that of 2019.

The data table for this graph is located below

View graphic in plain text

NATURAL GAS

BC's Liquefied Natural Gas (LNG) project in Kitimat and associated projects are well underway. One related project is a hydroelectric transmission line to BC's oil and gas fields in northeast BC. The plan is to lower the greenhouse gas emissions intensity of the province's LNG by electrifying upstream, a potentially important selling point when marketing LNG as a clean-burning transitional fuel.



The data table for this graph is located below

Sources: Statistics Canada Labour Force Survey
Service Canada Regional Industry Analysis (projections)

View graphic in plain text

Employment Projection (1,000s)

2019 pre-pandemic  2020
employment 
2021
forecast 
2022
forecast 
AB 72.8 70.3 73.5 74.6
BC 5.6 5.9 5.6 5.7
SK 3.4 3.8 4.5 4.6
MB 0.7 0.5 0.6 0.5

Note

In preparing this document, the authors have taken care to provide clients with labour market information that is timely and accurate at the time of publication. Since labour market conditions are dynamic, some of the information presented here may have changed since this document was published. Users are encouraged to also refer to other sources for additional information on the local economy and labour market. Information contained in this document does not necessarily reflect official policies of Employment and Social Development Canada.

Prepared by: Labour Market Information (LMI) Directorate, Service Canada, Region of Western Canada and the Territories

For further information, please contact the LMI team.

Endnotes


  1. Although Statistics Canada produces aggregate figures for support activities for mining, oil and gas extraction, a breakout showing support activities for only oil and gas extraction is not available.

  2. Alberta Energy Regulator – ST3: Alberta Energy Resource Industries Monthly Statistics - Oil Supply & Disposition

  3. Exxon Booted from Dow Industrials in Major Embrace of Tech – Bloomberg –

    https://www.bloomberg.com/news/articles/2020-08-24/dow-industrials-kicks-out-exxon-in-biggest-shakeup-since-2013

  4. Biden Cancels Keystone XL Pipeline and Rejoins Paris Climate Agreement – New York Times –

    https://www.nytimes.com/2021/01/20/climate/biden-paris-climate-agreement.html

  5. CAPP forecasts increase in oil and natural gas sector investment in 2021 – CTV News –

    https://calgary.ctvnews.ca/capp-forecasts-increase-in-oil-and-natural-gas-sector-investment-in-2021-1.5264947

  6. Suncor to cut up to 2,000 employees as pandemic diminishes oil demand – The Globe and Mail –

    https://www.theglobeandmail.com/canada/alberta/article-suncor-to-cut-up-to-2000-employees/

  7. Layoffs from Cenovus-Husky oilpatch merger expected to begin today – CBC –

    https://www.cbc.ca/news/canada/calgary/husky-cenovus-merger-layoffs-1.5886923

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