Low prices for oil and natural gas are negatively impacting the industry in Western Canada, leading to a decline in drilling activity that is expected to continue into 2026. North American oil prices are currently below $60 US per barrel, down from over $80 in January. As a result, oil and gas companies are reducing costs, with total capital spending projected to decrease by 5.6% this year and an additional 2.2% in 2026, according to a report by Enserva, a Calgary-based organization representing oilfield service companies.
The report predicts a 9% decrease in the total number of wells drilled in 2025 compared to 2024, including a significant 16% drop in British Columbia. Alberta is expected to experience a 7% decline in drilling activity this year, while Saskatchewan is forecasted to see a 10% decrease. Further declines of 4% are anticipated in both provinces in 2026.
In addition to oil, Canadian natural gas prices have also faced challenges, with prices falling below zero at times in September, resulting in some companies halting production to avoid incurring costs for giving away the gas. Canada has started exporting natural gas off the coast of British Columbia through the operationalization of LNG Canada this year, with several other LNG projects in various stages of development or construction.
Despite the current challenges, Gurpreet Lail, CEO of Enserva, remains optimistic about the long-term prospects of Canada’s energy industry, especially for natural gas. Lail pointed out that with LNG Canada becoming operational, Canadian producers are poised to benefit from sustained global pricing once short-term pressures ease going into the new year.
The Enserva report paints a bleak outlook for the oil and gas sector in the coming years, with major forecasting agencies not anticipating a recovery in oil prices until at least 2029 compared to 2024 levels. Job cuts in the oil and gas service sector began in the spring of this year and are expected to continue into 2025, remaining stable throughout 2026.
On the political front, an announcement is expected from Prime Minister Mark Carney and Alberta Premier Danielle Smith in Calgary regarding an agreement that would grant the province special exemptions from federal environmental laws and provide political backing for a new oil pipeline to the B.C. coast.
