The world continues to make use of extra vitality, however growing manufacturing – together with the necessity to put together for a low-carbon future – would require large capital investments.
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Canada’s economic system shut down in December as a recession looms, however that hasn’t derailed vitality funding or progress expectations for Alberta.
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And it underscores a basic level: the world continues to make use of extra vitality, however growing manufacturing—together with the necessity to put together for a low-carbon future—would require large capital investments.
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Two bulletins and a report issued Wednesday underscored that time, together with a brand new forecast that oil patch capital expenditures are anticipated to rise 11 p.c this 12 months.
In the meantime, pipeline large Enbridge lined up $3.3 billion in new investments and purchased a stake in a US-based developer of renewable pure gasoline.
“It actually hasn’t slowed it down,” Enbridge CEO Greg Ebel mentioned when requested in regards to the results of the slowing economic system on the corporate’s investments in vitality transition initiatives.
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“It’s going to take a really dramatic recession. . . Power will proceed to rise and so I believe new vitality applied sciences will as properly. I do not see it as a problem.”
The Canadian Affiliation of Petroleum Producers reported Wednesday that capital spending by the nation’s upstream trade will rise by $4 billion this 12 months to succeed in $40 billion, eclipsing pre-pandemic spending ranges.
Oilsands funding, which peaked practically a decade in the past, is anticipated to succeed in $11.5 billion, up 21 p.c. Standard oil and gasoline spending will complete $28.5 billion.
“We now have reached an vital milestone. We now have reached pre-COVID funding ranges,” CAPP CEO Lisa Baiton mentioned in an interview.
“The worldwide demand for oil and pure gasoline isn’t going to vanish. And it additionally highlights that the trade may be very dedicated to spending cash on actually key initiatives round lowering greenhouse gasoline emissions.”
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In Alberta, trade spending is anticipated to develop by about eight p.c to $28 billion, whereas in British Columbia it would rise to $7.2 billion. Spending in Saskatchewan and Newfoundland and Labrador will stay flat.
An much more optimistic outlook got here in Tuesday’s provincial finances.
It predicted that standard oil and gasoline funding would improve by 19 p.c this 12 months, whereas non-conventional funding would improve by practically 17 p.c.
“Nevertheless, with none greenfield initiatives on the horizon, oil and gasoline producers will proceed to focus spending on clear vitality initiatives, disrupting bottlenecks and optimizing present infrastructure,” it mentioned.
The CAPP forecast contains spending by the sector on vitality transition and emissions discount initiatives, that are more and more turning into a key focus amid rising local weather considerations.
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The sector is taking a look at main investments in areas equivalent to hydrogen, renewable pure gasoline (RNG) and carbon seize developments.
Enbridge, the nation’s largest pipeline firm, introduced Wednesday its progress technique contains $2.4 billion to modernize its pure gasoline transmission techniques, plans for a $240 million oil terminal in Houston, and the acquisition of US Gulf Coast gasoline storage belongings for US$335 million .
It additionally invested US$80 million to amass a ten p.c stake in renewable pure gasoline infrastructure agency Divert Inc.
Enbridge mentioned the deal contains an possibility to speculate as much as $1 billion in initiatives that can convert meals waste into renewable pure gasoline within the US.
After an investor day presentation, Ebel famous that the corporate will make investments about $1 billion in renewable initiatives this 12 months, which incorporates European offshore wind initiatives. Spending on newer vitality applied sciences, together with hydrogen and RNG, shall be considerably much less however ought to develop to about $1 billion yearly.
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With better incentives for carbon seize initiatives now accessible south of the border by way of the American Inflation Discount Act, there may be intense competitors over the place the corporate can make investments its capital.
“The competitors isn’t solely right here in Canada the place to place these {dollars}, however the competitors is the place in North America to do it,” he added.
Quite a lot of spending shall be required within the vitality transition.
RBC Economics beforehand pegged the worth of Canada reaching net-zero emissions by 2050 at $2 trillion, with firms and governments needing to put money into areas equivalent to electrification, retrofitting buildings and in CCUS to fulfill the nationwide goal.
A brand new report back to be launched Thursday by the Enterprise Council of Canada says the nation generally is a world chief within the vitality transition enviornment, although it would require a complete plan to draw funding and supply a secure regulatory panorama.
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“Canada urgently wants a coherent local weather and financial coverage agenda to make sure fast deployment of low-carbon capital and expertise,” it mentioned.
Such spending comes because the broader economic system slows.
Statistics Canada reported this week that the economic system shrank 0.1 per cent in December from the earlier month, prompting TD Economics to conclude that the nation “ended 2022 with a bang.”
A report by the Convention Board of Canada mentioned it expects “little or no financial enchancment within the 12 months forward and a minimum of 1 / 4 of destructive financial progress.”
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Enbridge earmarks $3.3 billion for Gulf Coast storage facility, different initiatives
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Whereas the suppose tank initiatives Canada’s GDP will improve by simply 0.6 p.c this 12 months, Alberta’s economic system will develop by 2.1 p.c, simply behind Newfoundland and Labrador, one other energy-producing province.
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The Convention Board mentioned Wednesday that Calgary’s economic system will develop by 3.2 per cent this 12 months, down from 4.8 per cent in 2022, however properly above the nationwide charge and the second highest within the nation.
Whereas a recession in Canada is extra probably, Alberta and Calgary will proceed to see GDP develop attributable to robust vitality costs and funding, mentioned Ted Mallett, the board’s director of financial forecasting.
“Capital funding is an indication that there’s prone to be robust manufacturing in future years,” he mentioned.
“It is certainly one of these clockwork indicators.”
Chris Varcoe is a Calgary Herald columnist.
cvarcoe@postmedia.com
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