Capital investment in Canada’s upstream oil and gas industry will rise 14% this year to C$27.3 billion (US$21.44 billion), the Canadian Association of Petroleum Producers (CAPP) said Jan. 13, although spending remains well below pre-pandemic levels.

CAPP attributed the expected increase in investment to COVID-19 vaccines being rolled out globally, which will revive economic activity and energy demand, and government support for Canada’s oil and gas sector.

Still, the forecast is 23% below 2019 investment and just one-third of the industry’s peak spend of C$81 billion reached in 2014.

The figures underline how Canada’s energy sector was struggling even before a price war between Saudi Arabia and Russia last year sent oil prices tumbling just as the COVID-19 pandemic crushed global fuel demand.

Capital investment hit a record low of C$24 billion in 2020 as producers canceled projects and shut in existing production to conserve cash.

“It is a positive sign to see capital investment numbers moving up from the record lows of 2020,” CAPP President Tim McMillan said in a statement. “This can be read as the start of what we expect will be a long road to economic recovery for the natural gas and oil industry and the Canadian economy as a whole.”

Canada is the world's fourth largest crude producer but limited access to markets, elevated costs and the high carbon-intensity of crude from its vast oil sands deposits have pushed the energy sector out of favor with international investors.

CAPP’s forecast showed the bulk of spending will be in the western province of Alberta, home to the oil sands and abundant conventional oil and gas reserves, followed by British Columbia and Saskatchewan.

($1 = 1.2732 Canadian dollars)