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Canadian profits returning to more normal levels
Gary Park Petroleum News Calgary Correspondent
Oil patch profits in the Canadian industry could be slashed in half this year, the Conference Board of Canada has predicted — but that assumes an easing of commodity prices.
The report forecasts profits of C$13 billion for 2004, down from last year’s staggering C$28.7 billion, with a further drop to C$10.4 billion in 2005, where the industry will hold the line in 2006 and 2007.
But the board says that even those levels are high by historical standards.
For the 2003 to 2007 period, the board expects light crude prices from Edmonton will fall to C$36.80 per barrel from C$44.70 as supplies from Iraq and non-OPEC countries rise; heavy crude will slide to C$26.60 per barrel from C$36.10; and gas will decline to C$5.50 per gigajoule from C$6.40.
The conference board expects a combination of falling gas production and lower crude prices will see total revenues shrink by 13 percent in 2004 and 1.5 percent in 2005 before edging back up by 1.7 percent in 2006 and dropping again by 0.5 percent in 2007. Production costs expected to grow The combined costs of oil and gas production are predicted to grow by 2.1 percent this year and capital costs are anticipated to climb by almost 12 percent, reflecting the investments in exploration and processing oil and gas off Canada’s East Coast and the Western Canada Sedimentary Basin.
Conventional crude output will drop by about 6 percent in 2004 and continue slipping by about 1.8 percent a year over the medium term, reflecting a loss of productivity in Western Canada.
Gas production is targeted to decrease to 5.89 trillion cubic feet by 2007 from 6.18 tcf in 2004.
But the board says the prospects for synthetic crude and bitumen are rosy, forecasting that refineries across Canada will convert their operations from conventional crude as those volumes decline.
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