Canadian Oil Producers Also Affected by Decline in Oil Prices
The drilling rights sales boom in the oil-producing region of Alberta in western Canada is slowing down as commodity prices decline.
According to provincial data, the average lease price for oil sands land has fallen to 771 Canadian dollars per hectare this year. That is eighteen percent lower than last year’s average, which was the highest since 2007. For land outside the oil sands, prices have dropped by twenty-five percent.
The fall in land lease prices is an early signal that the Canadian drilling boom, driven by last year’s completion of the Trans Mountain pipeline expansion, may be approaching its end. The Trans Mountain project gave producers nearly 600,000 barrels per day of new transport capacity, prompting drillers to boost output and snap up new drilling sites, pushing land prices to record highs in 2024. However, a double shock—from Trump’s introduction of global tariffsand a faster-than-expected production increase by OPEC+—has led oil prices to fall to four-year lows in recent weeks, Bloomberg reports.
“Canada is not immune to challenges related to global oil prices,” said Trevor Rix, Head of the Canadian Oil and Gas Research Group at Enverus.
The decline in oil product prices in Canada reflects the situation in the United States, where drillers are laying off workers, and some executives say that shale oil production may have peaked.
Nonetheless, Canadian producers are expected to continue increasing output over the next few years. For oil sands producers, the drop in oil prices may be offset by higher production volumes, and a new LNG plant in British Columbia is expected to stimulate drilling in oil-rich areas of Western Canada, according to Kevin Birn, Chief Analyst for Canadian Oil Markets at S&P Global.
Trans Mountain is already exploring ways to expand the capacity of its system, while Enbridge is working to add 150,000 barrels per day to its mainline system in the coming years.
According to S&P Global Commodity Insights, oil sands production is projected to increase by approximately 500,000 barrels per day by 2030, reaching 3.8 million barrels per day. Most of this new oil is expected to flow through Trans Mountain to the Pacific region, and this could be accompanied by a rise in gas throughput, as Canada’s first major LNG terminal is scheduled to come online by the end of this year.
