The Canadian Association of Petroleum Producers told local business owners to expect uncertainty in the times ahead.
The CAPP held their annual luncheon with the Lloydminster Chamber of Commerce on March 9 to update members on the current state of the industry. Chris Montgomery, Manager of E&P Engagement with CAPP, had to make some changes to his presentation after several factors over the weekend sent oil prices to drop by 30 per cent.
“The market is getting hit both on the supply and demand side right now. It’s a bit early to know what exactly those impacts will be both locally and in Calgary but producers are having to take a second look at their spending plans and what that looks like for the year.”
He says originally the update was looking optimistic but the economic worries over the COVID-19 virus and a price war between Saudi Arabia and Russia have tanked the price of crude oil over the weekend. In terms of how it affects local companies such as Husky Energy, Montgomery believes they will be going back to the books.
“There haven’t been any public announcements but they’re certainly going to be taking a look at their spending plans in light of the new economic reality they’re facing on the market.”
In the presentation, Montgomery mentions that the legal challenges faced by the big three oil pipelines are slowly moving through the system. Other challenges the industry faces are the curtailment program, municipal taxes and the increasing number of orphan wells.
“Prior to all this happening our primary concern was market access and it’s still a concern. The curtailment program was a direct result of the fact that we don’t have pipeline capacity to ship our product.”
According to Montgomery, the number one problem oil companies face in Saskatchewan is municipal taxes.
“It’s not our job to tell RM’s what the mill rate should be for example as the industry association but we’re looking for transparency to have conversations about the impact it has on our sector.”
Montgomery says CAPP is continuing to work with the Alberta government to reduce red tape and make regulatory changes.