Alberta Oil Faces Tough 2015, May Rebound Next Year

Already struggling under the weight of dramatic oil price declines and the uncertainty of a new political party in power for the first time in decades, the oil industry in Alberta, Canada, is expected to sustain a 17 percent fail in export earnings in 2015.

Forecasted by Export Development Canada, the province is expected to be hit hard this year, but there is a light at the end of the tunnel. Peter Hall, chief economist at the development agency, said industry growth in the United States and an anticipated increase in oil prices to the $70 per barrel level will fuel a turnaround next year. As a result, Alberta’s exports earnings could jump by 19 percent.

Alberta depends on energy for almost 75 percent of its export revenue. Energy exports are projected to shrink by 25 percent this year, but bounce back with 27 percent growth in 2016.

What’s more, Alberta’s political environment is in flux, said Neville Jugnauth, a partner at the Torys LLP law firm in Calgary, during the recent Mergermarket Energy Forum in Houston. The collapse in oil prices already set back Alberta’s industry, which accounts for three-quarters of the Canada’s oil production. All told, oil and gas proceeds represents 10 percent of Canada’s gross domestic product, Junauth said.

“Fast forward to our elections in May and we are left with a situation in which the dynamics have drastically shifted,” he explained. “After 44 years of government by Progressive Conservatives, [Alberta experienced] a political swing from right to left that no one had anticipated.”

Still, Jugnauth said, the shifting political sands represent more of Albertans’ discontent with the Progressive Conservative Party than a policy change. However, the new leadership is still getting its bearings and it could take months before the oil and gas industry feels the net effect of the change. The New Democratic Party will have to manage lower royalties resulting from the lower commodities environment while it attempts to implement a 2 percent increase in corporate taxes.

An award-winning journalist, Deon has reported on energy, business and politics for almost 20 years.


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