Energy sector woes

Much has been said, and certainly written, about the construction of the Trans Mountain Pipeline and what it will mean to the Alberta economy.  Although construction has resumed, it remains an uphill battle.

Despite the mass exodus of energy companies, either fleeing or ceasing operations, there has been some good news for the sector. Inter Pipeline plans to spend $935M on the Heartland Petrochemical Complex in 2020 and on the heels of the elimination of curtailments on conventional drilling, CNRL announced an increase in their 2020 investment budget of $250M. Although a paltry sum when you look at total capital expenditures, it is somewhat reassuring that there is still hope for our staggering energy sector.

NECB 2017 is a more stringent energy code containing increased U-factor requirements for the building envelope.  The new code has removed the Detailed Trade Off method of compliance.  Compliance must follow the Prescriptive, Trade Off, or Performance Path (Energy Model). 

Both RBC and ATB recently cut Alberta’s real GDP growth in half for 2019, with projected growth somewhere between 0.6 and 0.7 percent, behind all other provinces. Growth for 2020 is expected to be between 1.6 to 2.4 percent, still well below trend. Table 1, below, revealed the impact of oil production cuts and a reduction in energy investment on provincial GDP. Although gloomy, we will likely avoid dipping into another recession. Economic growth continues to be hampered by pipeline restrictions, a reduction in capital expenditures and low natural gas prices. Non-residential construction investment is expected to decline 0.9%. A provincial corporate income tax rate cut from 12% to 8% over the next four years may stimulate capital investment over the short to mid-term.