Petro-Canada and Husky Energy Inc., two of Canada’s largest oil and natural gas producers, both unveiled spending plans for 2008 that hike spending by 28% — but with less directed to Western Canada. Both will build on their oil developments, but Petro-Canada also plans to turn more attention to U.S. Rocky Mountain gas.
Petro-Canada said it will keep its “half-cycle” projects in Western Canada, but CEO Ron Brenneman said the company also will pursue more growth projects overseas and turn its attention to the gas deposits in the U.S. Rockies. It’s a strategy that has succeeded for cross-town peer EnCana Corp., which is Canada’s largest gas producer. EnCana also said this month that it plans to reduce its Canadian spending to focus on U.S. gas plays in 2008 (see Daily GPI, Dec. 13).
“Our business plan sees us move into a period of unprecedented growth as we continue to develop the suite of long-life assets,” Brenneman said.
Spending in Western Canada will decline to C$415 million from C$540 million this year.
“Although this strategic shift away from Western Canada was already planned, it’s fair to say it’s been accelerated by factors like the changes to Alberta’s royalty structure,” Brenneman said. “The royalty changes essentially make full-cycle exploration in the basin pretty marginal and even uneconomic in a lot of cases,” he said. “If you’re not filling the pipeline with exploration success, then that tends to go downhill fairly quickly.”
Petro-Canada unveiled a C$5.3 billion capital spending program for 2008, well ahead of its spending in 2007, and said spending on growth projects, exploration and new venture developments will jump 50% to C$3.6 billion. The Calgary-based producer also plans to invest C$1.2 billion to replace reserves in core areas, C$430 million to enhance existing assets and to improve profitability in the base business, and C$105 million to comply with new regulations.
Husky Energy Inc., also based in Calgary, plans to lift its 2008 capital spending to C$3.7 billion. Unlike EnCana and Petro-Canada, Husky said it will spend more to support its Western Canadian production — but for the oilsands, not gas. Husky also will build on its East Coast projects and on overseas development, said CEO John Lau.
“The company’s strategy is to focus on growth and high-return projects offshore on the East Coast of Canada, China and Indonesia as well as enable the company to move forward with its integrated bitumen development at Sunrise,” said Lau. Most of Husky’s cash, C$1.5 billion will go toward developing Western Canadian conventional oil assets.
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